POKHARA, May 10: The government's plan of taking commercial banks to all local units is unlikely to materialize in the current fiscal year.
Although Nepal Rastra Bank (NRB), as per the government's plan, has been requesting the commercial banks to expand their network to unbanked local units, many local units still do not have branch office of commercial banks.
Pomnath Gautam, chief of NRB Pokhara, told Republica that commercial banks are present in only 394 out of 753 local units across the country so far. Of the 85 local units in Province 4, only 39 units have branch offices of commercial banks. Remaining units, most of which are in rural areas, are still awaiting commercial banks.
"Some commercial banks have expressed interest to open branch offices in local units of the province, however, they have not initiated preparation for the same," said Gautam. He said that commercial banks are unlikely to open new branch offices in unbanked local units of Province 4 within Fiscal Year 2017/18 that is ending in two months.
"Looks like commercial banks will need some more time to reach all local units," Gautam said, adding: "We cannot force commercial banks to extend their presence in rural areas of the country. They extend their branch offices only if they see business," he said, adding: "But we will keep persuading them to go to unbanked areas."
He further added that banks are reluctant to go to rural areas because of small market. "Rural areas do not have much investment prospects. Also, banks do not mobilize much deposit from there," he said, added: "Similarly, a rural municipality covers very large area. In some places, people are facing difficulty to travel to the central administration office of the rural municipality."
Gautam also said that the central bank has already decided to provide Rs 10 million per branch opened in unbanked areas at zero percent interest rate in order to encourage them to go to rural areas. "They can invest the amount, charging 12 percent interest rate which can support them to meet their operation cost," he added.
Most of the villages in the country have cooperatives that are serving financial needs of the local people. As they are not seeing good business prospects, banks are reluctant to go to area.
"Not only in rural districts like Manang and Mustang, banks are reluctant to expand their branch offices in Kaski, Syangja and Baglung, among others," wondered Gautam.
He also said that banks will only go to local units that have infrastructures like road access, telecommunication services and Internet as well as security assurance. "We can encourage them, but cannot force them," added Gautam.