KATHMANDU, August 14: Nepal Rastra Bank (NRB) is preparing to allow development banks to handle government transactions in local units after commercial banks showed reluctant to show their presence in all local units.
Earlier, the government had decided to give such business to only 'A' class commercial banks. However, the government seems to have changed its mind and allow also the 'B' class national-level development banks to raise revenue and facilitate other financial transactions of the government in local units after commercial banks refused to open their branch offices in all 744 local units.“
"The government has told us to allow certain types of government transactions in local units through development bank”," Narayan Prasad Poudel, the spokesperson for the NRB, told Republica.
Though 28 commercial banks have agreed to open their branch offices in 250 of the 411 unbanked units, 161 units will not have any bank branch even after the commercial bank expand their presence in local units.
According to Nepal Bankers' Association (NBA), its member banks have agreed to open a bank branch in 250 out of 411 local units where there is not any commercial bank. The umbrella organization of commercial banks has already submitted the list of the local units where its members have agreed to start their service to the central bank.
Apart from giving some incentives like providing interest free loans to the bank opening branch in local units and opening 2,500 bank accounts, the central bank has also decided to allow commercial banks a monopoly in each rural municipality under 'first come, first served' basis, and restrict another bank to go to the same place for three years.
The new policy to allow development banks to facilitate financial transactions in local units was also in line with the demand that Development Bankers Association Nepal (DBAN) has placed before the central bank. The association of development bankers has reportedly expressed dissatisfaction with the NRB over what it calls discrimination of the central bank.
However, it's not clear yet whether the government will allow development banks to maintain local consolidated funds.
The government, through its budget speech for the current fiscal year 2017/18, has announced that it will make necessary arrangement to send at least one commercial bank in each local unit to maintain the local consolidated fund.
Executives of development banks have welcomed preparation of the government and the central bank to allow development banks in the local units.“
"Albeit late, the government has addressed our demand. We think that we can go to many places where the commercial banks are reluctant to ”o," Bharat Raj Dhakal, president of the DBAN, told Republica.
Dhakal told Republica that development banks are already present in 29 local units where there is not any commercial bank. He said that national level development banks can open their branch offices in 96 more local units.“
"We will submit details about which development bank will open branch in which local units very soon after holding discussions with all national-level development ban”s," he added.
Altogether 11 national-level development banks are operating in the country.
Dhakal, however, said that allowing development banks to go to local units for government transactions does not mean that all local units will have a bank branch as there will still be some local units where development banks cannot go.