Financial system is safe: Central bank governor Khatiwada

KATHMANDU, June 15:

The overall financial system is safe, said central bank governor Dr. Yubraj Khatiwada.

“Though there are some problems in some of the financial institutions, the overall financial system is safe,” he said, addressing the official merger announcement program of H&B Development Bank here in Kathmandu today.

“Currently, the financial sector is passing through a teething problem,” he said, adding that current liquidity problem is a short-term problem and has been addressed through repo or refinancing.

“The central bank is addressing current problems in every possible way to keep depositors’ confidence intact on the financial sector. But he urged the financial institutions not to misunderstand the central bank’s generosity. “Central banks will not rescue bad financial institutions,” Khatiwada said, banks are the custodians of public deposit. The financial sector depends upon public faith and its financial institutions’ duty to keep public faith by following central bank directives.”

Some financial institutions are in trouble due to bad governance and others due to over-dependency on institutional depositors and lack of portfolio management effectively, which is not a good trend, he said, requesting banks and financial institutions to differentiate between shareholders and depositors. “Unlike shareholders, the depositors will one day withdraw their deposits and the financial institutions should better understand and diversify risk, manage the portfolio and be less dependent on institutional depositors,” he said.

Like in any trade, the financial sector also has to passes through a cycle but we should take a lesson and move ahead, he said, adding that the central bank is overcoming all the problems one by one.

On the occasion, Khatiwada welcomed the move of two financial institutions — Himchuli Bikas Bank, Pokhara and Birgunj Finance, Kathmandu — for merger and becoming H&B Development Bank with Rs 897.93 million paid up capital and 23 branch networks.

The central bank has been encouraging for mergers of financial institutions as a small economy like Nepal maynot need many financial institutions but strong financial institutions to help propel economic growth. “The financial institution should consolidate,” he said, adding that Monetary Policy will address some of the bottlenecks and Fiscal Policy will address others, if there are any practical problems in merger.

“H&B Development Bank has created a history by proving that two financial institutions can be merged,” said CEO of H&B Development Bank Jasoda Sainju, the first lady CEO in the banking history of the country. “We will cater to the financial needs of customers by bringing various products,” she added.

Source: THT