The dispute between the two ministries has not only delayed the formation of the bank, but it has also made establishment of such separate financial institution uncertain.
The differences over the formation of the new bank came to a fore during a discussion organized by International Relations and Labor Committee of Legislative Parliament on Monday morning. Nepal Rastra Bank (NRB) has taken a side of the MoF.
“The plan to establish a bank dedicated to domestic labors as well as those who have gone into foreign employment is based on a recommendation made by two separate taskforces which have studied formation of such bank in Bangladesh and Japan.
It was introduced in the policy and program of the government unveiled by former President Ram Baran Yadav,” said Deepak Bohara, Minister for Labor and Foreign Employment.
The government had announced to open a separate financial institution for migrant workers in the common minimum program unveiled by Koirala-led government in the fiscal year 2014/15.
Such bank is expected to mobilize deposits of the workers, provide shares to them and offer easy and affordable financing options to migrant workers and their families.
“The formation of labor bank will help to mobilize the remittance while end the financial exploitation meted out against aspiring migrant workers who borrow loans on exorbitant interest rates to finance their foreign employment trip,” he added.
However, Surya Prasad Acharya, Joint Secretary at MoF, told the parliamentary panel that the government should not open any bank at a time when it was preparing to offload its stake in other government-owned bank.
“Financial Sector Development Strategy lays out plan to gradually divest government shares in the public banks. NRB is also preparing to decrease number of banks. Formation of any bank falls under regulatory arbitrage of NRB which has announced moratorium on issuing license for last five years,” said Acharya, who also heads Financial Sector Management Division at the MoF.
Interestingly, NRB Governor Chiranjibi Nepal, who had earlier recommended the formation of the bank following a study in Bangladesh in the capacity of Economic Advisor to the then Prime Minister Sushil Koirala, opposed formation of the bank.
“There were separate laws earlier to govern various banks which posed regulatory challenge. Thus, the umbrella act BAFIA, 2006 came into effect. Introducing any bank through separate law again will create similar challenge,” said NRB Governor Nepal.
Meanwhile, MoF and NRB have proposed formation of a ‘labor investment trust’ to mobilize remittances and provide financial service to the aspiring migrant workers. “While formation of bank is less feasible now, setting up a labor investment trust will both serve the welfare objective for the labors as well as provide financial service to them,” said joint secretary Subedi.
Members of the parliamentary committee have also demanded immediate formation of the institution that provides financial service to the migrant workers. “Banks have their own regulatory principles. Setting up investment trust for the labors similar to Citizens Investment Trust is good idea if it does not kill the spirit of banking and financial service to the migrant workers and labors,” said Sunil Bahadur Thapa, a member of the panel.
Following the disputes between the two ministries toward formation of the labor bank, the parliamentary panel has instructed the MoLE to submit a ‘concrete concept’ within 15 days in consultation with NRB and MoF.
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