KATHMANDU, June 3: The banks and financial institutions (BFIs) are found to be providing a large chunk of their loans to a handful individuals despite Nepal Rastra Bank (NRB)’s policy to promoting inclusiveness and extending financial accessibility to large number of the country’s population.
According to the NRB, a total of 194 individuals have taken loans worth more than Rs 200 billion. The records with NRB show that the BFIs have issued loans of Rs 5.534 trillion to 1.940 million of their clients.
Speaking at a meeting of the parliamentary Finance Committee on Monday, NRB Governor Biswo Nath Poudel acknowledged that certain individuals and groups have been enjoying large amounts of the credit issued by the BFIs. “As per the estimation of the central bank, 0.01 percent of the total numbers of borrowers have been utilizing 3.9 percent of the loans issued by the BFIs,” said Poudel.
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Amid ongoing controversies on whether the bankers and business persons are required to be separated through the amendment of Bank and Financial Institution Act (BAFIA) 2017, the NRB Governor has unveiled the large disparity prevailing in the financial accessibility in the country. “Based on the calculation, it is seen that the majority of the BFIs’ credits have gone into the hands of limited persons. It could be a matter of debate whether this could be a good practice or not. However, the major concern is whether such practice has contributed to improving productivity of the economy or not,” Poudel added.
While the BAFIA bill is under purview of the parliamentary Finance Committee at present, the majority of entrepreneurs have been protesting the government proposal to separate entrepreneurs from the banking business. According to the Federation of Nepalese Chambers of Commerce and Industry (FNCCI), around 300 shareholders have stakes of more than one percent in the BFIs.
Speaking at a parliamentary committee meeting last week, the FNCCI President Chandra Prasad Dhakal had said it would be unfair to bar the family members of BFIs’ major shareholders from taking loans. “If the proposal to separate bankers and entrepreneurs is materialized, it will lead to a closure of more than half of the operating businesses.”
Stakeholders have been demanding the government to categorise the natural persons and the percent of the BFIs shares that they hold to define the basis for loans to be issued by the BFIs. They have sought strict regulations on the issuance of credit by the BFIs rather than barring big investors from taking loans.
Speaking at Monday's meeting, NRB Governor Poudel said it is a serious concern whether there is growing centralization of the BFIs credit. “The new act should clearly demarcate concerns related to board members, executive bodies and borrowers of the BFIs along with the challenges that could arise due to the conflict of interests in banking business,” Poudel added.
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