Labor law will not apply in BFIs: Supreme Court

KATHMANDU, Dec 17: 

The labor law won´t apply on banks and financial institutions, the Supreme Court has ruled in a landmark decision for the financial sector, which has always feared frequent strikes and temporary closure of branch offices due to unruly behavior of some staff members.

The precedent-setting decision, made by a full bench of the apex court last Thursday, means banks and financial institutions can now refer to their own by-law whenever labor related problems crop up. 

“The court said labor law won´t apply in banks and financial institutions as they are governed by the Bank and Financial Institutions (BFI) Act that allows BFIs to form their own regulation for employees, which has to be approved by Nepal Rastra Bank (the country´s central bank),” Advocate Keshar Mani Arjyal told Republica. “Since the decision was made by a full bench, similar cases that are filed in future at the court will be immediately quashed.” 

The latest ruling came based on a case filed by one Prem Prasad Ghimire, an employee of Nirdhan Utthan Bank, a microfinance institution, at the Labor Court around five years ago. 

Ghimire had moved the Labor Court after his employers fired him for embezzling a little over Rs 20,000. Based on his petition, the labor court ruled in favor of him and asked the microfinance institution to reinstate him.

Later, the unsatisfied Nirdhan Utthan moved the Supreme Court, which denied to uphold the decision of the Labor Court. The case then reached the division bench of the apex court, which referred the case to the full bench, which on Thursday ruled in favor of banks and financial institutions. 

“This is a landmark decision for the entire financial sector as there were fears of labor-related problems - which have proved to be a bane for many sectors - sprouting in banks and financial institutions as well,” Harihar Dev Pant, CEO of Nirdhan Utthan Microfinance Institution, told Republica.

A snapshot of what Pant said was seen in March when employees of Swabalamban Microcredit Development Bank submitted 46-point demand to the management and later shut down the institution for around two months. Similar problem later hit Development Project Service Center (DEPROSC) Nepal and Nirdhan Utthan Bank, which also remained closed for significant amount of time.

“Banks and financial institutions cannot afford month-long strike as they deal with public´s money. The apex court´s decision is a welcome step, as it paves way for smooth development of the sector,” a banker told Republica on condition of anonymity.

Source: Republica