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Financial reforms update


Court-appointed governor of the central bank Tilak Bahadur Rawal says he's willing to discuss the timing and practicability of the directives issued by the Nepal Rastra Bank (NRB) to commercial banks recently, but there was no possibility of going back on financial sector reforms. In a 48-page statement distributed on Friday, the NRB adds that banks not meeting core capital adequacy requirements (Rs 500 million) by mid-July 2001 would be barred from paying dividends to share holders. Banks can count paid-up capital, general reserves, share premiums, non-redeemable preference shares, preference shares and retained earnings for meeting the capital adequacy requirement. But they cannot use the retained earnings without displaying capital adequacy. Rawal also said there was a tendency among bank promoters to offload shares after a certain number of years and walk away with profits, which the new directives also aim to discourage.

Rawal, sacked last year by the government on grounds of incompetence, was re-appointed governor after he came back with a court order 28 March. The reappointment came after about seven months. In the meanwhile, his successor Dipendra Purush Dhakal had begun some changes, such as cancelling the NRB's plan to purchase eight banknote sorters (Rs 6.4 million apiece), ending overtime payments to note sorters and requiring commercial banks to do their own sorting. Dhakal also began a move to "systematise" the contract workers by requiring them to take tests to become full-time staff. The NRB has about 300 contractual employees. Rawal has indefinitely postponed the examinations.

"I cannot go back on government policy, nor do I want to," Rawal says about financial sector reforms. The NRB has already selected a company to take over management of one of two troubled banks, while proposals for the second one are being evaluated. The plan is to hand over Nepal Bank Limited and the Rastriya Banijya Bank to foreign companies under a management contract by mid-July. The World Bank is helping the financial reforms project with a $20.5 million loan.


LATEST ISSUE
638
(11 JAN 2013 - 17 JAN 2013)


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