NRB must act

It is outrageous that more than a dozen leading commercial banks have continued to turn a deaf ear to central bank guidelines on limiting their interest rate gap on different savings account schemes to 2 percent more than two months after the guidelines were issued. The central bank issued the guidelines mainly to do justice to older depositors, as banking and financial institutions (BFIs) continued to give them meager interest returns even while offering higher returns to new depositors.



Based on the higher interest rates they promised new clients, BFIs had lost no time substantially jacking up their lending rates. Through an SMS notice, some of them raised lending rates by as much as 3 percent. But when it comes to offering fair returns on older savings accounts, they have continued to drag their feet.



Banks and financial institutions are regarded as the most professional entities in Nepal. So it is surprising that some half the members of Nepal Bankers’ Association (NAB) are being difficult, even while the others have already complied with the guidelines. Prompt compliance by 19 NBA members indicates that implementing the guidelines is not really burdensome. Some of the defiant banks continue to argue that the guidelines are faulty because they directly interfere in their prerogative to decide interest rates.



Theoretically they are correct. And if they had treated their loyal clients fairly, NRB would not have had to step in. By not complying with the guidelines, the banks are only proving their professional incompetence. This could not only prove costly for them but also dent the image of the sector as a whole. Hence the need for NBA to do something.



As a body of professionals NBA has taken many prudent initiatives in the past for enhancing the credibility of the banking sector. But it has continued to remain silence in the present case. Equally surprising is the silence of the central bank. NRB had received all round praise when it announced the guidelines on the interest rate gaps. But lack of enforcement of the very same guidelines has done its reputation no good. Nepali consumers have long suffered not just because of the failings of regulatory authorities.



Even the government has repeatedly acted like a lame duck when it comes to enforcing numerous decisions taken for upholding consumers’ rights. Compared to them, NRB was always regarded as much more professional. It has always successfully countered cartels and unfair practices in the banking sector. But the silence of the central bank over enforcing its guidelines on interest rate gaps has raised the worrying question: Is NRB too joining the sorry league of inefficient regulators? We urge NRB to act promptly so that the answer will be negative.

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