Nepal Rastra Bank ( NRB ) Governor Yuva Raj Khatiwada on Thursday advised bank directors "either to become a banker or a businessman", saying their dual role has been "self-contradictory".

First the directors complain about liquidity crunch and say interest rates cannot be slashed, but the same directors, presenting themselves as businessmen the next day, complain about higher interest rates, the governor said. "It is not necessary for a businessman to become a banker. It is better they part ways," he suggested while addressing the "National Directors Conference" organised by National Banking Training Institute.

Traditionally, proprietors of business houses hold crucial positions like chairman and board members in banks and financial institutions (BFIs) they have promoted. Against this backdrop, the governor said it is not necessary that the one putting in money should hold positions on the board. He suggested appointment of professional and capable persons on the board so as to maximise profits.


Indicating most of the bank directors lack adequate banking knowledge, Khatiwada said many promoters have an illusion that they are the "masters of their banks". "You must get out of the illusion that the company is yours," he told the directors. "Promoters have the mindset that why they can't get loans from banks they have promoted."


The governor suggested bankers to study the existing laws which clearly define the roles and responsibilities of the board and the management. The Bank and Financial Institution Act has barred board members and promoters having more than 1 percent stake in a particular BFI from taking loans from the same BFI. He asked the bankers to understand that banks are not only their possessions, but also of employees and the society at large.
The governor flayed bank directors' tendency to 'lobby' for allowing them to sanction loans to a certain interest group even if the loan seekers are not eligible. He also hit out at promoters working as employees. "The practice of taking two benefits — bonus as an employee and dividend as an investor — must end," Khatiwada said.


Governor Khatiwada stressed on check-and-balance between the board and the management. "The situation of board members complaining about the CEO and the CEO complaining about the board must end,' he said. Asking bank directors not only to focus on making profits, the governor said: "Banking is not a business in which profit can be magnified within a short period, but by offering good services to customers."


He requested BFIs to maintain strong internal control mechanism to minimise operational risks. Risks at operational levels have emerged as a big challenge in the banking sector. This is evident with recent incidents of unauthorised withdrawals from ATMs in collusion of bank staff.


Deputy Governor Mahaprasad Adhikari said BFI boards should not intervene much in day-to-day operation. "The best corporate practice can help increase the management's efficiency without making any intervention in their daily functioning," he said.
Adhikari added the board should hand over the job of devising strategic plans to the management and only take up the job of forming guidelines and giving necessary approvals to plans presented by the management.

source: ekantipur

Corporate News

India makes exemption for Nepal, allows some refined palmolein imports

February 12, 2020- India, which restricted imports of refined palm oil and palmolein in January, has exempted Nepal and has started issuing licences to import some refined palmolein from the Himalayan nation, two government officials told Reuters.

Read more ...

HIDCL, Power China to build 762MW Tamor reservoir project

Kathmandu, September 16- The Hydroelectricity Investment and Development Company Ltd (HIDCL) and state-owned Power China Corporation have jointly submitted a project development proposal at the Investment Board Nepal (IBN) to build the 762-megawatt Tamor reservoir project, which will cover Panchthar, Taplejung, Terhathum and Sankhuwasabha districts.

Read more ...

Security audit of BFIs compulsory

Kathmandu, September 10- Nepal Rastra Bank (NRB) has made it mandatory for banks and financial institutions (BFIs) to conduct an audit of their information and technology (IT) system.

Read more ...

Age limit set for CEOs, directors at BFIs

KATHMANDU: Nepal Rastra Bank has set an age bar for board of directors and chief executive officers of banks and financial institutions (BFIS).

Read more ...
Symbol % Change Last Price Turnover
TPC 10.1449 532.0 1,200,368.0
NBB 10.1227 359.0 78,348,179.0
MKJC 10.0209 527.0 10,408,576.0
NIBLPF 10.0000 11.0 251,978.0
NTC 9.9914 1,277.0 164,339,250.0
Symbol % Change Last Price Turnover
VLBS -2.3669 1,650.0 11,812,950.0
SBIBD86 -2.3415 1,001.0 90,350.0
MLBBL -0.9975 1,985.0 2,583,021.0
NLG -0.9524 936.0 6,741,837.0
PBD85 -0.9288 960.0 72,000.0
Symbol % Change Last Price Turnover
MLBL 9.7333 823.0 372,688,498.0
NHPC 8.9412 463.0 304,219,800.0
API 2.7613 521.0 233,673,436.0
LBBL 1.5152 670.0 182,483,005.0
NTC 9.9914 1,277.0 164,339,250.0