The biggest and, no doubt, the most difficult task for the new governor is to restore the confidence and reputation of the central bank which has been badly tarnished by corruption charges against past governor Bijaya Nath Bhattarai, which few believe is true. Yes, many questions can be raised about former governor Bhattarai regarding his competency, his arrogant behavior, and much more. But, hardly any believe he was actually involved in the molly-coddled corruption charge which had him removed from the post of governor. Of course, there were some technical errors that could have been solved easily with a warning letter from the CIAA.
Nevertheless, many remarkable contributions Bhattarai made during his tenure as governor of the central bank, with his glorious and successful fight against bank defaulters the most notable. A new chapter has now opened up with the appointment of a new governor, who will be at the post for over 12 months, the remaining tenure of discharged governor Bhattarai. Being a retiree of the bank, he requires no teaching about its organizational structure, working procedures and, more importantly, its weaknesses.
Critics say he spent more time on union activities than he did working for the hardcore objectives of the central bank, mainly consisting of formulating and implementing monetary policy. Nevertheless, he has a sound idea on real sector, particularly in agriculture-related problems, according to his colleagues. More than that, there is hardly anyone to raise questions about this clean image. Even today he is remembered at the central bank for his refusal to accept extra allowance for meetings organized within office time. Many of his colleagues don´t chose words in admiration of his dashing, outspoken personality, or his fearlessness.
President appoints new governors, swearing-in today
Kshetry has had interesting ups and downs in his career at the central bank. Left-leaned Kshetry joined the central bank in as a third-class officer at the Agriculture Loan Department in June 1977. He became the first elected leader of the Trade Union of left-wing employees, after the restoration of democracy in 1990. During his tenure as leader, he brought out a controversial booklet that exposed huge corruption within the NRB’s Mint Department, and the alleged involvement of the then deputy governor in importing a British minting machine worth million of rupees that didn´t function well.
The booklet also argued that the NRB was importing a huge amount of blank coins, despite having enough stock for several months through greed for commissions. The booklet led to the eruption of anger among the then top brass of the NRB, including governor Hari Shankar Tripathi, resulting in his dismissal from the central bank on disciplinary grounds in 1991. He was charge with ´plotting a plan to loot national treasure´. However, the Supreme Court reinstated Kshetry to his previous post after three years. During the period of suspension, he was appointed a member of the National Development Council from the United Janamorcha Party, held at the time by current financial minister Dr Baburam Bhattarai. After returning to the central bank, he spent a significant length of time at the research department of the central bank, mainly analyzing Balance of Payment.
Nevertheless, Kshetry faces much more difficult days ahead than he ever did in the past. First, he must revitalize a financial sector reform that has been on its dead bed after former Governor Bhattarai’s suspension, by reorganizing domestic political and donors’ supports. When the reform was initiated in 2003, almost eight banks were in deep financial trouble. The number has now gone down to three, and the overall non-performing loan of the banking system has edged down to around 12 percent from 30 percent in 2002. The banking system is now much more capable of withstanding any unexpected external or internal shocks than before.
Nevertheless, a more vigorous reform is its hour of need in the country’s financial sector, particularly in the wake of the global financial crisis and possible negative impacts it can bring to the domestic economy. More than that, the central bank has to decide a concrete a roadmap for the country´s two largest banks, Nepal Bank Limited and Rastriya Banijya Bank. Without this the banks can plunge back into the same gorges from where they were rescued at the cost of around five billion rupees. No doubt, ´privatization with optimum transparency´ is the best remedy, as the private sector has proven it is perfect in handling banking business, compared with the public sector, as long as it has efficient monitoring and supervision.
Weak human resources that don’t at all match the growing challenges, both at the financial and monetary sector, is the second most serious challenge for the central bank. Many observers say that the current workforce at the NRB is the weakest in recent history. There is a need for reform in its recruitment polices, which notoriously limits entry points to the career with the bank. New policy should allow entry of experts at the higher post in a competitive way. In this process, special attention should be paid in enhancing the research department, the heart of the central bank, which is responsible for this whole sorry mess.
prem@myrepublica.com
