'I may have a different style of working but my ulitmate goal is to ensure financial stability'

The government appointed Economist Chiranjibi Nepal as the 16th governor of Nepal Rastra Bank on Thursday. Nepal, a master’s degree holder in economics and PhD degree holder in Labour and Economic Relations, took oath of office and secrecy on Sunday and joined office the same day. He will remain in office for the next five years. In an interview with Rupak D Sharma and Pushpa Raj Acharya of The Himalayan Times, Nepal, who has served as economic adviser to Prime Minister Sushil Koirala, talked about the performance of his predecessor Yubaraj Khatiwada and how he plans to steer the central bank. Excerpts:

How do you evaluate the performance of your predecessor Yubaraj Khatiwada?

His five-year term in office was a success. Well, he couldn’t please everyone. But it’s not possible to please everyone as well.

It is said Khatiwada didn’t work in collaboration with banks and financial institutions. As a result the gap between the central bank and banking institutions widened during his tenure. Can bankers expect something different during your term in office?

I’ll try to maintain a good relationship with the private sector and work in collaboration with private institutions. The central bank has to work in collaboration with the private sector to build confidence in the financial sector. This, in turn, draws investment. But the private sector should also maintain good governance in their institutions.

What will be your priorities?

My main focus would be on maintaining stability in the financial sector. Financial sector is considered as the brain of a country’s economy and the banking sector is considered as the heart of the financial sector. So, stability of this sector is of utmost importance to ensure proper growth of the economy. My other priority would be on inclusive growth of the financial sector. For this, financial literacy rate must be increased. It is said banking services are not accessible to more than half of the population. My focus would be on making banking services available to those who are still unbanked. I would also focus on drafting laws and regulations based on commitments expressed to the international financial sector, so that our laws and regulations are in line with international standards. This will raise the credibility of the domestic financial sector and send a positive message to the international community. Also, activities in the informal sector seem to be growing. I’ll come up with policies to integrate the informal economy into the formal sector.

NRB has currently withheld over three billion rupees belonging to a businessman due to suspicion of money laundering. How will you deal with the case?

I have just joined office and I am yet to be briefed about it. But if the transaction is illegal then I’ll take action accordingly. We have already expressed commitment to the Financial Action Task Force, an international body that creates standards for fighting financial crime, to combat illegal activities like money laundering and terror financing, so we cannot afford to take cases of money laundering lightly.

But will you be able to overcome the political pressure?

I will always put the country’s interest above an individual’s interest. I will be doing great injustice to the country if I put an individual’s interest above everything else. Also, I will not succumb to any kind of pressure and put the economy at stake.

The central bank seems be focusing too much on regulating banks and financial institutions. As a financial adviser to the government, shouldn’t it also focus more on research?

The regulatory part of the central bank should always be strong. If the regulatory part is weak, banks and financial institutions may misuse billions of rupees deposited by the general public. Such cases will only cause people to lose trust in banks and financial institutions, which is not good for the economic development of the country. But like you said the research wing should also be strong so that more effective policies can be introduced. Good policies help build confidence. When I was the chairman of Securities Board of Nepal, the securities market regulator, I introduced nine new regulations, which helped in increasing the number of stock investors and pushing up the benchmark stock index. So, my aim would be to introduce effective policies so that the confidence of the people and investors towards the financial sector can be boosted. And I think I’ll be successful in achieving this goal because NRB is the best public institution in the country, which has a set of qualified human resources. I’d also make efforts to make NRB even better by enhancing skills of employees.

It is said many real estate investors were waiting for retirement of immediate past governor Khatiwada so that they could create pressure on NRB to lift the ceiling on real estate lending. How are you planning to deal with the issue?

Khatiwada did a commendable job as a governor. And regulations issued during his tenure played a key role in creating stability in the financial sector. I may have a different style of working but my ultimate goal is also to ensure financial stability. So, I won’t be doing anything to destabilise the sector or create panic among investors. However, I have just joined office and I am yet to be briefed on various matters. So, I am currently not in a position to explicitly say what kind of measures I would be taking.

There is also debate on whether NRB should be allowed to continue performing two conflicting roles of setting the inflation target and measuring changes in consumer prices as well. What is your take on the issue?

I know this dual role has chances of creating conflict of interest. But prior to handing over the responsibility of measuring changes in consumer prices, we must find a capable institution. Currently, no other government agency is as capable as NRB in performing this task. Once we find another capable institution, the job can easily be transferred.

Source:THT