“BFIs that want to go for voluntary liquidation shall submit an application to Nepal Rastra Bank with a work-plan,” states Clause 74 of the draft amendment bill which was tabled in the parliament on Monday for approval.
The central bank may give permission for voluntary liquidation after examining the application if it is convinced that such BFIs or foreign bank or Nepal branch of any foreign BFIs is capable of settling its debt and liabilities, the provision states.
Apart from voluntary liquidation, the central bank can take any BFIs into forceful liquidation.
“The provision will allow any institution for a voluntary exit. In liberal market, the entry and exit of any company or firm should be easier,” a banker said.
Likewise, the amendment will pave the way for formation of much-awaited Infrastructure Development Bank to finance infrastructure projects in the country.
The amendment bill also includes a number of provisions toward ensuring corporate discipline in bank and financial institutions (BFIs). The bill also proposes capping the term of CEO to two terms with the current term being counted as the first when the amendment comes into effect.
In a bid to prevent money laundering, the central bank has also included a provision that requires BFIs to report the central bank immediately if it finds any suspicious transactions of any clients. “Though such measure has been included in the anti-money laundering act, the central bank aims to make sure that such crime does not take place,” a director of NRB told Republica, requesting anonymity as he is not authorized to put views on the draft law.
Unlike other BFIs, who are required to float 30 percent of their shares to the public, the amendment will shield the government-owned BFIs and Infrastructure Development Bank from such requirement.
Provisions related to formation of subsidiary company, opening of branch office of foreign bank, and merger and acquisition have also featured in the amendment bill. Similarly, in a bid to protect consumer rights, the amendment also includes a provision which states that the central bank can issue directives for consumer welfare protection.
According to central bank officials, it will be easier for promoters to offload their shares after a lock-in period once the amendment bill is approved. The provision of demotion of class of BFIs has been erased from the amendment bill.
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