Fiscal Policy fails money‚ capital markets
KATHMANDU:
As suspected the government has not been much successful in promoting the financial market as proposed in the current fiscal year’s budget.
This fiscal year’s budget had tried hard to encourage the merger of banks and financial institutions (BFIs). However, the provisions and incentives did not lure many banks and financial institutions to opt for the merger.
Earlier the merger were charged with taxes as that of asset transfer, the current budget removed clause but did not introduce any incentives like tax exemption that had disappointed bankers.
Thus, the financial system witnessed only two sets of mergers taking place since the budget - between Nepal Bangladesh Bank and Nepal Sri Lanka Merchant Banking and Finance and another between Himchuli Bikas Bank and Birgunj Finance.
Moreover, the mergers were also not the result of government policy but they were in talks regarding the merger way before the budget was announced.
“There are about 30 banks and financial institutions that are considering mergers and are negotiating terms with each other,” said Nepal Rastra Bank (NRB)’s spokesperson Bahskar Mani Gyanwali. “We are hopeful of mergers.”
However, the deposit insurance scheme is one of the success stories of the current fiscal year’s budget. The budget had extended the coverage of Small Deposit Guarantee Programme for the deposits of up to Rs 200,000 to ‘B’ and ‘C’ class financial institutions – development banks and finance companies. As of now Deposit and Credit Guarantee Corporation has insured the small deposits of 67 finance companies, 72 development banks and one microfinance development bank.
As for capital market, the annual budget had appeared to be promising with the assurance to make the legal provisions to set up the much needed credit rating agency and to promulgate law for the effective regulation and supervision of futures and commodities’ markets.
The budget had also announced that Non Resident Nepali (NRNs) will be allowed to invest in Nepali capital market.
But, so far only Credit Rating Agency (CRA) Regulation has been realised. The Regulation has finally been endorsed by Finance Ministry and has come into effect recently.
“So far, we have yet to receive formal application for establishment of the agency,” said Niraj Giri, director of Securities Board of Nepal (Sebon) — the capital market regulator.
The credit ratings help layman investors to decide for themselves whether or not to be involved with that particular company.
As for introducing the law to regulate the existing futures and commodities market, the process is still ongoing.
Since the budget announcement Sebon had geared up to undertake the role of regulator and supervisor of the commodities and futures. “The draft of amended Act is at Ministry of Law and Justice as it was forwarded by Finance Ministry but it has to be endorsed by the Parliament,” he said.
Though, the budget had opened up Nepali capital market for NRNs in ‘principle’, there still are practical complications for the entry and exit of foreign retail capital in Nepal.
The NRN investment is not coming in due to absence of any mechanism regarding the procedure for NRNs to take back their investment and returns from Nepal due to limitation imposed by monetary authority — Nepal Rastra Bank (NRB).
The stakeholders had been voicing their concern over the timely implementation of the programmes in the budget. Due to late budget, there was only eight months to fulfill the obligations, but as always current fiscal year’s budget was more a promising paper than a reality.
Source: THT
As suspected the government has not been much successful in promoting the financial market as proposed in the current fiscal year’s budget.
This fiscal year’s budget had tried hard to encourage the merger of banks and financial institutions (BFIs). However, the provisions and incentives did not lure many banks and financial institutions to opt for the merger.
Earlier the merger were charged with taxes as that of asset transfer, the current budget removed clause but did not introduce any incentives like tax exemption that had disappointed bankers.
Thus, the financial system witnessed only two sets of mergers taking place since the budget - between Nepal Bangladesh Bank and Nepal Sri Lanka Merchant Banking and Finance and another between Himchuli Bikas Bank and Birgunj Finance.
Moreover, the mergers were also not the result of government policy but they were in talks regarding the merger way before the budget was announced.
“There are about 30 banks and financial institutions that are considering mergers and are negotiating terms with each other,” said Nepal Rastra Bank (NRB)’s spokesperson Bahskar Mani Gyanwali. “We are hopeful of mergers.”
However, the deposit insurance scheme is one of the success stories of the current fiscal year’s budget. The budget had extended the coverage of Small Deposit Guarantee Programme for the deposits of up to Rs 200,000 to ‘B’ and ‘C’ class financial institutions – development banks and finance companies. As of now Deposit and Credit Guarantee Corporation has insured the small deposits of 67 finance companies, 72 development banks and one microfinance development bank.
As for capital market, the annual budget had appeared to be promising with the assurance to make the legal provisions to set up the much needed credit rating agency and to promulgate law for the effective regulation and supervision of futures and commodities’ markets.
The budget had also announced that Non Resident Nepali (NRNs) will be allowed to invest in Nepali capital market.
But, so far only Credit Rating Agency (CRA) Regulation has been realised. The Regulation has finally been endorsed by Finance Ministry and has come into effect recently.
“So far, we have yet to receive formal application for establishment of the agency,” said Niraj Giri, director of Securities Board of Nepal (Sebon) — the capital market regulator.
The credit ratings help layman investors to decide for themselves whether or not to be involved with that particular company.
As for introducing the law to regulate the existing futures and commodities market, the process is still ongoing.
Since the budget announcement Sebon had geared up to undertake the role of regulator and supervisor of the commodities and futures. “The draft of amended Act is at Ministry of Law and Justice as it was forwarded by Finance Ministry but it has to be endorsed by the Parliament,” he said.
Though, the budget had opened up Nepali capital market for NRNs in ‘principle’, there still are practical complications for the entry and exit of foreign retail capital in Nepal.
The NRN investment is not coming in due to absence of any mechanism regarding the procedure for NRNs to take back their investment and returns from Nepal due to limitation imposed by monetary authority — Nepal Rastra Bank (NRB).
The stakeholders had been voicing their concern over the timely implementation of the programmes in the budget. Due to late budget, there was only eight months to fulfill the obligations, but as always current fiscal year’s budget was more a promising paper than a reality.
Source: THT
