According to a senior banker, they expressed their objection during a meeting Sunday between executives of Nepal Banker’s Association and the governor of Nepal Rastra Bank (NRB).
“We stressed that since NRB, the central bank, is the line agency for the commercial banks to communicate with the government, the government should follow the proper channel,” said the banker requesting anonymity.
We also told the governor that the recent practice of holding direct talks with the commercial banks will set a wrong precedent and should be checked immediately. It will encourage other ministries to follow suit, said he.
Instead, senior executives of NBA urged the central bank to form a committee comprising representatives of NBA, MoF and NRB for formulating a modality to fund the employment program. “The modality should be acceptable to all stakeholders and should ensure lenders how can they recover their investment if the loans become problematic,” said the banker. It is good that we have been assured that the central bank will being the process for forming the committee, he added.
In a recent directive, the NRB asked all commercial banks and financial institutions to earmark one-third of their deprived-sector loans for the Youth Self-Employment Program. The program was announced in the budget for the current fiscal year.
As per the directive, commercial banks and financial institutions have been asked to allocate 0.25 percent of the amount by mid-April and deposit the sum in a separate bank account opened in the name of the program. Likewise, they have also been asked to earmark one-third of the Deprived Sector Loan (DSL) amount by mid-January 2010.
As per the existing arrangement, commercial banks are required to allocate three percent of their total lending under the DSL program.
The Youth Self-Employment Program aims to provide non-collateral and concessional loans up to Rs 200,000 through banks and financial institutions in order to provide self-employment opportunities to youths, commercial agriculture and agro-industries or service sector.
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