Sunday, August 9, 2009

Banks still in fragile zone: Governor Bhattarai

Domestic banks and financial institutions are not out of risk and are still vulnerable, opined Nepal Rastra Bank (NRB) governor Bijayanath Bhattarai.
"The central bank might add more disclosure requirements," he said talking to the newly elected committee of Society of Economic Journalists Nepal (Sejon) here today. Banks should be operated by prudent norms and should not merely wait for NRB directives, he opined adding that the capital base of banks should be sound. "Few but strong banks is the need of the hour rather than numerous and weak banks that have negative networth and poor Capital Adequacy Ratio (CAR)".
"If banks and financial institutions are not run according to prudent norms, the central bank will take action against them to safeguard depositors' money," Bhattarai, who joined the office after two years, said. "The central bank wil take punitive measures if they do not obey directives and reform themselves."
Since the money in banks and financial institutions is that of the depositors, they should be shielded. After the Nepal Development Bank (NDB) fiasco, the government has brought the deposite insurance programme. "Though there is no full-proof regulatory norm to save banks from failing, deposite insurance can save small depositors," Bhattarai said adding that the financial sector reform programme that has slowed down in the recvent years will also be expedited.

NBL to get professional team
KATHMANDU: Nepal Rastra Bank (NRB) governor Bijayanath Bhattarai said Nepal Bank Ltd (NBL) -- the oldest bank of Nepal -- will soon get a professional managerial team. NBL is being run by Dr Binod Atreya, who was sent from (NRB). There will be a conflict of interests if the central bank continues to run NBL. The central bank is the regulatory authority, and it has been running NBL for more than two years. A high level committee -- including finance minister, vice-chairman of National Planning Commission (NPC), finance secretary and governor -- has been formed to work out the details of NBL's and Rastriya Banijya Bank's (RBB) reforms and to look after the overall financial sector reform programme, Bhattarai said. NBL has 41 per cent government share and RBB is wholly a government undertaking. Though these banks have been successful in reducing Non Performing Assets (NPA) over the years, the government has to inject capital to bring these banks back in thegreen zone. NBL and RBB -- by the end of the fiscal year 2007-08 -- had 12.4 per cent and 21.7 per cent NPA respectively. They further reduced NPA to 8.6 per cent and 18 per cent respectively by April 13, 2009. "However, they still have negative capital fund," Bhattarai added.

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