KATHMANDU, June 21: Following widespread criticisms of some of the provisions in a bill to amendment the Bank and Financial Institution Act (BAFIA), a full house meeting of the parliament on Tuesday sent the bill back to the parliament’s Finance Committee for further discussion and revision.
The house meeting also added some instructions while returning the bill to the Finance Committee. The move comes in the wake of criticism that some of the provisions in the amendment would weaken corporate governance of bank and financial institutions.
After months of debate in the committee, the bill was forwarded to the full house for final endorsement.
Finance Minister Bishnu Prasad Paudel announced the decision to send it back to the committee with a view to revise the contentious issues, relevant international practices and concerns expressed by stakeholders.
The Finance Committee had endorsed the amendment bill on BAFIA on May 26 and forwarded it to the full house for final approval.
However, some of the committee members involved were severely criticized for including some of provisions which they were accused of having put in with a clear motive to serve their own interests. Experts had even warned that these provisions were introduced to suit personal and corporate interests of legislators who are also promoters of bank and this could even jeopardize banking and financial stability of the country.
Banking experts, former Nepal Rastra Bank governors and economists, among other stakeholders, have fervently criticized the involvement of some of the bank chairmen and promoters in formulation of the bill despite them having conflicts of interest.
The amendment bill was endorsed by the Finance Committee based on a report of a seven-member sub-committee which also had Ichha Raj Tamang, a legislator who is the chairman of Civil Bank Ltd, as a member. Prime Bank Ltd Chairman Umesh Shrestha and Janata Bank Ltd Chairman Uday Nepali Shrestha are the other legislators who are members of the Finance Committee and have taken participation in the amendment process.
The parliament has decided to send back the bill, instructing the Finance Committee to conduct further discussions and review the provisions that have drawn criticism. The house sent the amendment draft to the Finance Committee urging it to further discuss and review provisions related to the definition of BFIs, promoter shareholders’ lock-up periods, allocation of shares to BFI employees and qualification and tenure of the board directors and chairs of BFIs.
Among others, the Finance Committee’s decision to scrap a provision that proposed limiting BFI board directors’ and chairs’ tenure to a maximum two terms had prompted criticisms from banking experts who alleged that this was apparently at the behest of the legislators who were also promoters of BFIs.
“A necessity has been felt to frame the law that is in line with international norms, other existing laws and a national need for the development of bank and financial institutions and prioritize corporate governance there,” Finance Minister Paudel other at the parliament on Tuesday. “Similarly, it is also necessary to discuss and reach a conclusion on the qualification of board directors, managing directors and chairs to avoid any possible conflict of interest and to strengthen the operating system of BFIs,” he added, clarifying the reasons to send the amendment bill back to the Finance Committee.