KATHMANDU, FEB 21 - 2013
With banks and financial institutions (BFI) grappling with operations risks of late, Nepal Rastra Bank has directed them to arrange extra capital as a precautionary measure.
Lately, fraud in the H&B Development Bank, Nabil Bank, Himalayan Bank and General Finance have become the highlights of operation risks in BFIs.
As per the central bank directive, banks vulnerable to operational risks will be charged 5 percent of their gross income of the previous year as capital charge. Earlier, such charge was 2 percent only.
However, B and C class financial institutions are compulsorily charged five percent of their immediate past fiscal year’s gross income as a caution against operational risks. An NRB official said the provision has been implemented only for banks found vulnerable to the risks.
“Development banks and finance companies, however, must arrange the capital, irrespective of their vulnerability,” said the NRB official. “Such discriminatory measure was taken as B and C class financial institutions have been found more vulnerable.”
Bankers have expressed dissatisfaction over the circular. Sashin Joshi, chief executive officer of NIC Bank, said it was knee-jerk reaction on the part of the central bank. “The NRB generalised incidents that happened in a few BFIs,” he said.
Himalayan Bank CEO Ashoke Rana said that as banks are already directed to arrange additional one percent buffer capital in the capital adequacy ratio, extra capital charge in the name of addressing operational risks was not needed.
Meanwhile, the NRB has barred government employees, either working in the civil service, corporations or schools, from representing a board of any BFI as shareholders except in cases where they are representatives of the government agency.
“This, however, doest not bar board directors from enjoying the post until their tenure expires,” the NRB regulation says.
NRB spokesperson Bhaskarmani Gnawali said that the move was taken to discourage conflict of interests among board members.
The NRB has also defined small and medium scale enterprises (SME) as one that has maximum paid up capital of Rs 5 million, authorised capital of Rs 50 million, is involved in manufacturing and service industries and that has been involved in tax regime voluntarily.
Source: The Kathmandu Post
With banks and financial institutions (BFI) grappling with operations risks of late, Nepal Rastra Bank has directed them to arrange extra capital as a precautionary measure.
Lately, fraud in the H&B Development Bank, Nabil Bank, Himalayan Bank and General Finance have become the highlights of operation risks in BFIs.
As per the central bank directive, banks vulnerable to operational risks will be charged 5 percent of their gross income of the previous year as capital charge. Earlier, such charge was 2 percent only.
However, B and C class financial institutions are compulsorily charged five percent of their immediate past fiscal year’s gross income as a caution against operational risks. An NRB official said the provision has been implemented only for banks found vulnerable to the risks.
“Development banks and finance companies, however, must arrange the capital, irrespective of their vulnerability,” said the NRB official. “Such discriminatory measure was taken as B and C class financial institutions have been found more vulnerable.”
Bankers have expressed dissatisfaction over the circular. Sashin Joshi, chief executive officer of NIC Bank, said it was knee-jerk reaction on the part of the central bank. “The NRB generalised incidents that happened in a few BFIs,” he said.
Himalayan Bank CEO Ashoke Rana said that as banks are already directed to arrange additional one percent buffer capital in the capital adequacy ratio, extra capital charge in the name of addressing operational risks was not needed.
Meanwhile, the NRB has barred government employees, either working in the civil service, corporations or schools, from representing a board of any BFI as shareholders except in cases where they are representatives of the government agency.
“This, however, doest not bar board directors from enjoying the post until their tenure expires,” the NRB regulation says.
NRB spokesperson Bhaskarmani Gnawali said that the move was taken to discourage conflict of interests among board members.
The NRB has also defined small and medium scale enterprises (SME) as one that has maximum paid up capital of Rs 5 million, authorised capital of Rs 50 million, is involved in manufacturing and service industries and that has been involved in tax regime voluntarily.
Source: The Kathmandu Post
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