Merger for banking efficiency: NRB Governor

KATHMANDU, Dec 20: Nepal Rastra Bank (NRB) governor Yuba Raj Khatiwada has said that the central bank was encouraging mergers between banks to minimize the cost and optimize efficiency of the banking system.

He argued that a high number of financial institutions does not ensure healthy competition. It might create unhealthy competition thereby leading to a decline of productivity, he said at an event on ´Reforms, Incentives and Banking Sector Productivity: a Study of Nepal´ held in the capital on Thursday.

Khatiwada said liberalization creates an enabling environment for efficiency in the economy. “Though liberalization is a necessary condition for efficiency, it may not be sufficient as other factors also play key roles in increasing production,” he noted.

Likewise, presenting his research report, Professor Kul Bahadur Luintel of Cardiff University said bankers have become motivated following deregulation and reform. “Their [bankers´] effort has gone up by almost 50 percent in 2011 compared to the levels in 2003/2004,” he concluded.

Nepal Bankers´ Association President Rajan Singh Bhandari said banks and bankers in Nepal were maintaining transparency and were accountable toward NRB.

(Source: REPUBLICA)