KATHMANDU, Dec 30: Commercial banks are yet to open their branch offices in over five dozen local units. According to the Nepal Rastra Bank (NRB), commercial banks have reached 689 local units as of Wednesday. There are still 64 local units in 33 districts that are yet to welcome any commercial bank.
Most of these local units are located in hilly and mountainous districts.
Despite their own commitment to open branches in these local units within mid-July this year, the banks are still struggling to get it done.
The central bank has also been offering various facilities and incentives to the commercial banks to open their branches in the remote areas as part of its efforts to increase financial access across the country.
However, bankers say that the remoteness of some local units comes as challenge for them to open branch offices.
"We have opened our branches in almost all local units. But, there are few remote local units where it has been very difficult for us to set up our offices, either due to lack of appropriate house or due to lack of other basic infrastructure like internet, security and road access," said a banker.
"Just because the government needs commercial banks to go to local units immediately does not mean that we can open branches overnight. Banks will gradually show their presence in the remaining local units," the banker added.
Among others, the central bank provides interest-free loans of Rs 10 million per branch for one year to those establishing branches in designated local levels in order to facilitate government transactions.
The NRB has also made commitment to make it mandatory that all government transactions at rural municipalities must be done through banks. The central bank has even decided to bar any other new bank from opening its branch in the local unit for at least two years. Based on this provision, the banks will enjoy their monopoly in the local units where they reach first.
The NRB also provides a relaxation to banks whereby they are not required to maintain the cash reserve ratio and statutory liquidity ratio based on the deposit liabilities of those branches for the next three years.
Despite all these efforts for the last two years, commercial banks have still not met the target.
The government had first announced its policy through the budget speech of Fiscal Year 2017/18 that each local unit will have a commercial bank branch.
In line with the government announcement, the central bank had issued a circular last fiscal year requiring banks to open their branches by mid July in accordance to their own plan.
The central bank had even warned that it would penalize those who fail to open their branch office as per their plan submitted to the NRB. However, the NRB has not taken any action against those banks yet.