Undoubtedly, the revelations of huge financial embezzlement running into millions perpetrated by former bosses of Nepal Share Market and the rush of depositors to withdraw their life savings from Gorkha Development Bank after it was declared problematic, are just some recent developments that have badly dented the credibility of banks in Nepal.
Weak monitoring and supervision capacity at the central bank has been a given for many years. When Nepal launched a multi-billion rupee financial sector reform project back in 2005, strengthening the monitoring and supervision capacity of the central bank was one of its major components. However, the ill-intentioned filing of corruption charges against then Governor Bijaya Nath Bhattarai completely derailed the mega project. It is no exaggeration to say that had the reforms been duly implemented at the central bank in their original spirit, most of the banking-related problems that NRB is now confronting could easily have been averted.
The governor has rightly pointed out the need for an overhaul of human resources at the central bank, which is increasingly facing new challenges and is having to do so with incompetent manpower. We completely agree that NRB’s regulation departments that were structured years back to look after a handful of banks concentrated in the capital no longer have the capacity required for monitoring and supervising some 200 financial institutions spread across the country.
Undoubtedly, additional manpower is needed if you plan to enhance capacity, but we urge the governor to take extra care in recruitment to check entry into the central bank of dirty party politics. Sorry to say so but it’s a fact that the central bank has turned into a morass of unproductive manpower milling around party politics round the clock.
Our prescription is simple and clear: recruit a few dozen highly qualified fresh-faced youngsters, equip them with world-class training and blend that in with the best available information and communications technology. Another worrisome reality at NRB is that it has a weak research department. A research wing is widely regarded as the heart of a central bank. We urge the governor, who himself headed the research wing for many years, to pay urgent attention to strengthening that department. Beware! You are planning for a marathon, but you’re doing it with a heart that’s in poor shape.
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