Bankers make slew of suggestions on banking laws

KATHMANDU, Sept 14:

Bankers have urged the government to end a provision that requires investors, who hold less than 5 percent promoter shares in any banks and financial institutions (BFIs), to seek permission of Nepal Rastra Bank (NRB) before sell their shares or putting them as collateral.

Presenting its suggestions for amendments to three key acts -- Banks and Financial Act (BAFIA) 2071, Nepal Rastra Bank 2058 and Banking Offence and Punishment Act 2064, Nepal Bankers Association (NBA) said the central bank´s consent was not needed except for changes in the share structure of those investors who have significant role in the management, operation and control of a bank or financial institution.

As per the Sub-clause 1 of Clause 11 in the draft of BAFIA 2071, any investors, who have promoter shares of any BFI, can sell or put the shares as collateral after five years of the bank´s operation and after issuing the shares to the public only remaining under the NRB´s terms and condition or directives.

Bankers, however, have taken exception to such clause. “The new law should ensure that an investor, who have nominal shareholding in BFI, do not need to take the consent of the NRB to sell or put such shares on collateral after the lock-in period,” Senior Advocate Bharat Raj Upreti, presenting a paper on behalf of the NBA, in Kathmandu on Sunday.

The bankers have also expressed dissatisfaction over the proposed provision of putting a ban on board of directors of BFIs from taking the post for more than two consecutive terms. They said the provision should be scrapped altogether. “As this prohibitory provision bans BFIs from appointing their institutional promoters as board directors for more than two consecutive terms, this should not be incorporated in the proposed law,” NBA said in its suggestions to the government.

Meanwhile, speaking at an interaction organized by NBA to discuss on the draft laws in Kathmandu on Sunday, Finance Minister Ram Sharan Mahat said that banking laws should not give upper hands to any particular stakeholders. “While bankers have their desire for excessive freedom in the laws, the central regulatory bank has its obsession for the regulatory power. The law should strike a fine balance between these two perceptions,” said Mahat.

Similarly, NRB Governor Yuba Raj Khatiwada said the central regulatory bank was not in favor of micromanagement of the banking industry. “We, however, are required to work as the mediators, hear the complaints related to the banking industry and ensure financial stability sometimes even through the forceful method. This is because financial stability is the ultimate aim of the central bank and the governance is the main pillar to ensure stability,” Khatiwada said.

He further argued that banking laws should prevail over other laws if there is any contradiction

Pradeep Jung Pandey, president of the Federation of Nepalese Chambers of Commerce and Industry (FNCCI), said that the new laws related to the banks should have the provisions which ensure investors easy entry, existence as well as exit from the banking industry.

Source: Republica