NRB: NHCL to settle all cheques from mid-December

KATHMANDU, NOV 25 - 2012

Nepal Rastra Bank (NRB) has announced it would stop clearing and settlement of cheques from banks and financial institutions (BFIs) begining mid-December and that all BFIs have to switch to Nepal Clearing House Limited (NHCL) for electronic clearing of their cheques.

The NHCL has been carrying out electronic cheque clearing of its memers, while the central bank has been clearing and settling the cheques of those who have not yet become member of the NHCL. While all the commercial banks have taken membership of the NHCL, only 19 development banks and 18 finance companies have been clearing and settling their cheques through the NHCL.

NRB spokesperson Bhasker Mani Gnawali said that the NRB about two months ago had issued a circular, asking all BFIs to become NHCL member by December 16 for clearing and settlement of cheques.

Under the manual settlement, financial institution (presenting bank) collects the cheque of other institutions (paying bank) and take them to the NRB for settlement, which takes up to two days. On the contrary, for electronic settlement the presenting bank scans cheques and send them to the NHCL, which forwards them to the paying bank. The paying bank, after verifying the signature and other details, sends them back to the NHCL, which then forward them to the NRB for the final settlement. According to the NHCL, the entire process is completed in real time.

Neelesh Man Singh Pradhan, CEO of the NHCL, claimed the number of financial institutions (FIs) approaching it was increasing by the day and that the remaining FIs would become its members.

In a bid to accommodate a large number of BFIs in their system, the NHCL recently upgraded its system and software and the upgraded infrastructure has been in use for the past one week. “Currently, we are clearing and settling 8,108 cheques on average daily,” said Pradhan. “With the upgradtion we can provide facility to all the players of Nepali financial sectors.”

The NHCL was established about four years ago in the joint ownership of 23 commercial banks, two development banks, Nepal Rastra Bank (NRB) and Smart Choice Technologies (SCT) in order to switch the manual clearing into electronic system. However, it came into operation only a year ago as its operation was halted by the Commission for Investigation of Abuse of Authority (CIAA) to investigate over alleged misappropriation during the software procurement.

Some bankers had expressed strong reservation over the high cost at which the software was purchased as the cost associated is ultimately transferred to the member BFIs.

Source: The Kathmandu Post

NRB may reject proposal to stop auctioning of six ailing firms

KATHMANDU, Aug 19, 2012

The Nepal Rastra Bank (NRB), central monetary authority, can reject a proposal from the Ministry of Industry (MoI) to stop bank and financial institutions (BFIs) from auctioning the properties of six ailing industries that have long been defaulting loan.

The central bank source clarified that it was not in a position to prevent banks and financial institutions (BFIs) from auctioning the assets of the industries that have failed to make timely repayment of loan and stated that it would be against the existing laws.

NRB source stated that existing Bank and Financial Institution Act (BAFIA) doesn´t allow the monetary regulator to stop BFIs from auctioning the properties of those ailing industries until the government take decision for the special treatment of those industries regarding loan payment.

“NRB can´t direct any BFIs not to go ahead with auctioning the properties of debtors industries that have long been defaulting loan. Protection of industries from getting their properties auctioned is not possible unless government make special arrangement for those industries for their relief,” NRB source told Republica.

TheThe Ministry of Industry (MoI) had recently written to the NRB requesting to protect six struggling industries- Birat Leather Industries, Birat Shoes Company, Everest Floriculture, Nepal Boards- producers of wooden goods, Siris Herbal Company and Dolphin Manor Wildlife Resort. The letter had requested NRB to stop the auctioning of the assets of six industries for the next six months.

“NRB can prevent the auctioning of their properties only in the case if the government issues gazette provisioning that sick industries get such privilege,” the source added.

The government had formed a 8-member Sick-Industries Rehabilitation High-Level Task Force (SIRHLTF) led by Dipendra Bahadur Kshetry, vice-chairman of National Planning Commission (NPC) in a bid to seek measures to the ailing industries. However, the ministry, which has been assigned to identify actual sick industries in the country, has just started the study.

The government has already formed around a dozen committees over a decade to study the situation of the ailing industries and recommend measures to rejuvenate them. Though each of the panel suggested different measures, they never came up with a specific criteria to define sick industries.

Source: Republica

Credit to agriculture sector surges 60pc

Credit to agriculture sector surges 60pc

KATHMANDU, JUL 29 - 2012

After seeing virtually no growth in agriculture lending in previous five years, commercial banks’ credit to agriculture sector swelled in the last fiscal year 2011-12, a central bank data shows.

According to the Nepal Rastra Bank (NRB), commercial banks’ lending to the sector increased by 60 percent to Rs 22.70 billion over the first 11 months of the last fiscal year against the same period previous year. The size of the loan in the sector rose by Rs 10.66 billion during the period.

The central bank said that the positive outcome is being seen of the government’s policy to encourage banks and financial institutions (BFIs) to increase lending in the sector like agriculture and energy. The central bank have made the mandatory provision that the BFIs must lend 10 percent of the total lending to agriculture and energy sectors since last fiscal year.

NRB Deputy Governor Maha Prasad Adhikari claimed that it was the indication that the central bank’s policy started to deliver the result. “Increasing trend of commercial farming in the recent years, setback in real estate and shares, and tendency of people to take loans from BFIs are other reasons behind increased lending in the agriculture sector this year,” he said.

According NRB data, there was a growth of 122.5 percent in lending in forestry, fishery, farming and slaughter, while animal farming and services witnessed a growth of 17.1 percent in the first 11 months last year. Even the lending in agriculture related machineries which is not categorised as agriculture sector loan, also witnessed a staggering growth of 284 percent in the review period last fiscal year.

Bankers also admit that central bank’s policy encouraged investment in agriculture. “Although I am suspicious the data about the growth of lending it is really positive indicator,” said Sashin Joshi, chief executive officer of NIC Bank.

He said that there has been emergence of new types of commercial faming over the last 2-3 years, which also triggered increased demands for loans in the sector.

Rastriya Banijya Bank is now planning to a substantial increase agriculture loan this fiscal year after seeing rise in loan demands from the sector.

According to Krishna Prasad Sharma, CEO of the country’s largest bank, increased trend of commercial farming in both plants and livestock in the recent days triggered loan demands from the sector.

“That’s why, we have planned to increase lending in the sector by Rs 2 billion this year,” he said, adding that the bank would also invest in agriculture production and marketing.

Source: The Kathmandu Post

Bank bosses allowed to take business loans, says NRB

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