Commercial banks yet to reach 122 local units

Published On: July 29, 2018 01:10 AM NPT By: Republica  | @RepublicaNepal

KATHMANDU, July 29: According to the latest data of the Nepal Rastra Bank (NRB), commercial banks have opened their branch offices in 631 local units so far, leaving 122 local units without their coverage. 

NRB Spokesperson Narayan Poudel told Republica that the central bank was pressing commercial banks to open their branch offices in line with the plan the Nepal Bankers Association (NBA) has submitted to the NRB.

"This is a very good progress as most of the local units have got commercial banks even in such a short period of time," said Poudel, adding that the central bank will continue to push banks to open their branch offices in the remaining local units.

According to Poudel, commercial banks are preparing to open their branch offices in 91 local units, and they have reported to the central bank that they have been facing various problems in reaching 18 local units.

Citing challenges like lack of office building, security arrangement, internet and telephone connectivity and road access, banks have been reluctant to open their branch offices in many rural local units. 

In the absence of commercial bank in the local units, local governments are facing difficulties in opening bank accounts for the management of their funds.

While the central bank has been providing various incentives to encourage banks to open their branch offices in local units, it has not proven to be much effective.

As the NRB is committed to making it mandatory that all local level official transactions must be done through the banking channel, the banks' branches are likely to get business not only from government transactions, but also from the private sector. 

The NRB also provides interest-free loan of Rs 10 million per branch for one year to those banks establishing branches in designated local levels in order to facilitate government transactions. 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.

Similarly, through the monetary policy for the current Fiscal Year 2018/19, the central bank has also scrapped the requirement to take permit to open branch office except in metropolitan and sub-metropolitan cities. To provide regulatory relaxation for those showing presence in those remaining local units, it has announced that commercial banks will not have to maintain cash reserve ratio and statutory liquidity ratio for those branches.

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