FinMin making things difficult for Insurance Board

KATHMANDU, Nov 4:

Finance Minister Ram Sharan Mahat has directed the Insurance Board (IB) to not take any decision that could make long-term impact on insurance sector.

The direction issued to the insurance sector regulator a month ago states that IB should comply with the approved annual budget and programs and not take any decisions that makes long-term impact on insurance sector.

IB officials say the finance minister’s direction has made working environment ‘uncomfortable’.

Joint secretaries of the Ministry of Finance and Ministry of Law and Justice, General Manager of Nepal Airlines Corporation (NAC) and an independent expert are the members of the board of directors of IB which is led by chairman appointed by the government.

Dipendra Bahadur Chhetri, former governor of Nepal Rastra Bank (NRB), said Mahat’s direction is guided by prejudice. “Suggestion on a specific issue can be justified. But nonspecific directions could be intentional. They can weaken the regulating agency,” Chhetri said.

The recent direction is the third one given by Minister Mahat after he assumed office in February. Officials say the minister is issuing series of directives to compel IB Chairman Fatta Bahdur KC to exit after he failed to find ‘substantial reasons’ to sack him.

“Earlier, employees of IB were protesting against KC. The minister had also formed a probe panel to investigate into IB’s policy and programs. But the panel found nothing against the board chairman,” added Chhetri.

Sources at the finance ministry termed the direction as ‘an ill intention’ to weaken IB.

IB Chairman KC told Republica that he had received direction from Minister Mahat. But he denied to divulge details.

Insurance expert Nil Saru said there should not be direct intervention in day to day functioning of a regulating agency. “The ministry, however, can issue directions on specific issues,” he added.

According to Saru, Nepal Rastra Bank (NRB) is comparatively independent compared to Securities Board of Nepal -- the stock market regulator -- and IB.

Krishna Prasad Devkota, spokesperson of the finance ministry, said IB has been told to implement only the approved programs. When Republica questioned why the ministry was intervening into day to day works of a regulating agency, Devkota said the directions were mere instructions issued to a line agency.

Sources say the direction has forced IB to halt the process of taking action against some problematic insurance companies. Two weeks ago, Agriculture Development Bank CEO Tej Bahadur Budhathoki was removed by the bank’s board as per the direction of Minister Mahat.

IB is often hailed for its stringent measures for maintaining good governance in the insurance sector. IB had taken over Everest Insurance Company to maintain good governance last year. It had also conducted due diligence audits of Prime Life Insurance and NB Insurance to assess their financial health and take appropriate measures accordingly.

Source: Republica