KATHMANDU, JUL 20, 2012
Nepal Rastra Bank (NRB) has back tracked from a directive issued to banks and financial institutions (BFIs) barring their top level personnel from taking bank loans.
Following angry reactions from directors of BFIs, the central bank has clarified that it has forbidden them from taking personal loans only, and that they are free to take business loans. NRB had recently issued a unified directive stating that board directors, chief executives and managerial level officers of BFI’s were prohibited from taking other loans except education, hire purchase and home loans and loans for household purposes.
Given that most of the promoters of BFIs are businessmen, they would have had to either leave their BFIs or not borrow money for their businesses if they wanted to remain in their posts.
“What we meant by that provision is that bank directors should not take personal loans from any other BFI,” said NRB spokesperson Bhaskarmani Gnawali. He added that family members of the directors were free to borrow money from other BFIs.
The central bank’s move has been directed at discouraging the tendency among bank bosses to borrow money from each other’s organisations on the basis of their power to lend and not the viability of their businesses. The practice of obtaining credit from other banks has become rampant in the financial sector as those in top management positions and promoters are not allowed to get loans from their own banks.
The directive was a hot topic of discussion among senior officials of NRB at a meeting held to discuss the upcoming monetary policy on Thursday. “The discussion concluded that bank directors should not be barred from taking business loans from other banks as most of the promoters are businessmen,” said a central bank official. “The upcoming monetary policy will clearly mention that while preventing them from taking personal loans.”
Panicked by the new provision, officials of the Nepal Bankers’ Forum, an association of bank promoters, met with NRB officials on Wednesday to protest against the central bank’s decision. They were enraged at NRB for bringing a new policy without consulting them. “If NRB acts to bring reforms in the system, it is okay, but it should consult with the stakeholders and give time for adjustment,” said Pradeep Jung Pandey, chairman of Citizens Bank International.
He added that NRB allowing bank bosses to take business loans and preventing them from taking personal loans was a welcome step. “But it should give time for bankers to adjust to the new situation,” he said.
NRB plans to bar staff from taking loans
Nepal Rastra Bank plans to bar its employees from taking loans except education, hire purchase and home loans and loans for household purposes. A meeting of senior NRB officials on Thursday concluded that such a measure was needed to ensure loyalty and hard work of the central bank staff. “Such a measure will be taken by issuing a new code of conduct for NRB staff,” said the central bank official.
Source: The Kathmandu Post
Nepal Rastra Bank (NRB) has back tracked from a directive issued to banks and financial institutions (BFIs) barring their top level personnel from taking bank loans.
Following angry reactions from directors of BFIs, the central bank has clarified that it has forbidden them from taking personal loans only, and that they are free to take business loans. NRB had recently issued a unified directive stating that board directors, chief executives and managerial level officers of BFI’s were prohibited from taking other loans except education, hire purchase and home loans and loans for household purposes.
Given that most of the promoters of BFIs are businessmen, they would have had to either leave their BFIs or not borrow money for their businesses if they wanted to remain in their posts.
“What we meant by that provision is that bank directors should not take personal loans from any other BFI,” said NRB spokesperson Bhaskarmani Gnawali. He added that family members of the directors were free to borrow money from other BFIs.
The central bank’s move has been directed at discouraging the tendency among bank bosses to borrow money from each other’s organisations on the basis of their power to lend and not the viability of their businesses. The practice of obtaining credit from other banks has become rampant in the financial sector as those in top management positions and promoters are not allowed to get loans from their own banks.
The directive was a hot topic of discussion among senior officials of NRB at a meeting held to discuss the upcoming monetary policy on Thursday. “The discussion concluded that bank directors should not be barred from taking business loans from other banks as most of the promoters are businessmen,” said a central bank official. “The upcoming monetary policy will clearly mention that while preventing them from taking personal loans.”
Panicked by the new provision, officials of the Nepal Bankers’ Forum, an association of bank promoters, met with NRB officials on Wednesday to protest against the central bank’s decision. They were enraged at NRB for bringing a new policy without consulting them. “If NRB acts to bring reforms in the system, it is okay, but it should consult with the stakeholders and give time for adjustment,” said Pradeep Jung Pandey, chairman of Citizens Bank International.
He added that NRB allowing bank bosses to take business loans and preventing them from taking personal loans was a welcome step. “But it should give time for bankers to adjust to the new situation,” he said.
NRB plans to bar staff from taking loans
Nepal Rastra Bank plans to bar its employees from taking loans except education, hire purchase and home loans and loans for household purposes. A meeting of senior NRB officials on Thursday concluded that such a measure was needed to ensure loyalty and hard work of the central bank staff. “Such a measure will be taken by issuing a new code of conduct for NRB staff,” said the central bank official.
Source: The Kathmandu Post
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