'Need to distinguish bankers from borrowers'

KATHMANDU, April 16: Nepal Rastra Bank (NRB) Governor Dr Yuba Raj Khatiwoda has stressed on the need to draw a strict line to separate interests of businessmen who are promoters of banks as well as industrialists.



This is one of the main reasons that have been contributing in the erosion of public confidence toward banking system, Khatiwada, while addressing an interaction organized by Confederation of Nepalese Industries (CNI) on current economic crisis that the country is facing. [break]



“Businessman should either be a banker or a borrower. You shouldn´t be both,” he said and added that the practices of pledging bank owners´ shares to take margin loan from other banks have contributed to the rise in imprudent banking practices.



He also pointed out unclear practices while calculating interest spread and loan repayment amount and urged the banking community to contribute in removing such confusions.



Dr Khatiwoda also defended the practice of keeping records of banking transactions worth over one million rupees and tried to convince business people that such records are not meant for tax investigations.



CNI president and lawmaker Binod Kumar Chaudhary expressed concerns over eroding investors´ confidence due to lingering political instability and emerging economic turmoil.



“The dwindling stock market is the clear indication of weakening investors´ confidence,” Chaudhary said and urged the government to do the needful to revive shrinking capital market.



He also raised concerns over the rapidly rising lending rates and lengthening liquidity crunch and warned that the denial of financial institutions to release committed funds, citing lack of resources, can trigger disaster for both financial and industrial sectors.



President of Nepal Bankers´ Association Sashin Joshi said that rather than economic crisis, the country is facing crisis of confidence in financial sector due mainly to lingering political instability.



“It is quiet obvious to see lending rate rise when the economy is facing liquidity crunch,” he said. He declined allegations that rising lending rates is putting industrial sector in trouble and said the industrial sickness was there even when the rates were at record low.



Joshi prescribed a series of proposals to attract deposits like providing interest tax waiver for the long term deposits and relaxation on taxes to domestic industries that produce goods for domestic consumption.



Ram Sharan Shrestha, president of Finance Companies´ Association of Nepal, stressed on the need to take serious initiatives to reverse declining confidence of depositors towards banking system.

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