Bankers unhappy with NRB new employee guidelines

KATHMANDU, APR 08:

The Nepali banking sector seems to be going through a déjà vu as the central bank is moving forward with guidelines for employee management of financial institutions while bankers are calling it unnecessary meddling.

Nepal Rastra Bank (NRB) is bringing out guidelines for employee management of financial institutions to provide the banking sector with a model for remuneration, other facilities, appointments and promotion criterion for employees of class ‘A’, ‘B’ and ‘C’ financial institutions.

In December, 2011, NRB had brought guidelines for the remuneration of chief executive officers (CEO) of commercial banks which was met with huge opposition from the bankers. Later, NRB also brought regulations for CEOs of development banks and finance companies.

In a similar fashion, NRB is being accused of trying to micromanage financial institutions. “Appointments, promotions and number of executives need to be left alone to a particular bank’s prerogative. It is not the regulator’s job to dictate these matters,” said a CEO of a commercial bank.

Though the draft proposed by NRB does not dictate salary, it has specifically provided the basis and weightage for performance appraisal or recruitment appraisal of existing and prospective employees. Likewise, the proposal has also spelt out the number of eligible leaves of absence that can be allowed for an employee.

“As a private entity, financial institutions have their own appraisal criteria and employees are provided with remuneration and facilities based on contributions and performance,” the CEO said, adding that these decisions become subjective after a point of evaluation so they cannot pay the same salary based on levels and qualifications.

NRB has asked financial institutions to form two committees for employee management and recruitment. One committee headed by a non-executive director with three to five members will look after employee management and remuneration as per existing regulation. Likewise, another committee headed by a deputy CEO and two department heads will work as the appointment committee that will take most of the appointment decisions by following NRB mandated guidelines.

However, the central bank does not agree that it is meddling with the internal matters of a private entity. “NRB is not dictating the pay scale but is only providing guidelines that will lead the financial institutions to select the best employees and create an unbiased environment within as well,” said NRB spokesperson Bhaskar Mani Gyanwali.

The draft has proposed to introduce a provision that allows financial institutions to appoint employees based on open competition and even for internal promotion employees have to go through written and practical tests mandatorily.

“If financial institutions had been following proper governance, the central bank would not have stepped in. Moreover, this is nothing new but a few amendments to the existing guidelines,” said Gyanwali. In recent years, employees of financial institutions were found to have been involved in misappropriation of funds and card frauds, increasing operational risks.

Likewise, NRB is also planning to introduce guidelines for financial administration of a financial institution. According to the proposed draft, CEOs of financial institutions will not be allowed to incur expenses of more than Rs 10,000 from the financial institution’s fund. For expenses more than Rs one million, the financial administration committee and financial directive committee will have to seek a detailed tender.

Source: THT