BFIs should be under central control: Bankers

Kathmandu, July-22 Banks and financial institutions (BFIs) involved in deposit and credit transactions should be brought under the jurisdiction of the central government, banking experts and bankers said Tuesday, as they presented their views on the draft constitution which has proposed to put them under the control of the federal states.



They said that it would be difficult for the central bank to regulate and supervise them if they were to be put under the states. They also opined that there could be different layers of regulators, but they should come under the central bank too.



Nepal Rastra Bank (NRB) Governor Chiranjibi Nepal said that there should be a single regulator to monitor the financial dealings of even the proposed state-level BFIs. According to him, the central regulator could only regulate the money market thereby tackling the sector’s systemic risk.  



Former NRB governor Yuva Raj Khatiwada said that BFIs involved in deposit and credit transactions must be brought under the central government. “In fact, there is no need to make a massive change in the existing financial structure or the functions of the central bank in the proposed constitution,” he added.



Speaking at a programme organised by the National Banking Institute (NBI) and the Society of Economic Journalists, Nepal, Khatiwada said that despite calls for delegating authority to the provincial and local governments to expand financial access,



caution should be adopted about the possible outcome of the arbitrage among the different regulatory bodies.  According to him, there should be proper coordination between the central and state authorities if regulators are formed at both levels.  



Presenting a paper, NBI Chairman Shovan Dev Pant said that the monetary, banking and financial structure could emerge as the main reason for disputes between the central and state governments if the present provision in the draft constitution were to be implemented.  Former finance secretary Rameshore Khanal said that there could be a separate regulatory authority to govern BFIs located in the proposed eight states. “However, all of them should be controlled by the central bank,” said Khanal, adding that the new constitution should target decentralising the activities of BFIs at the grass-roots level.  



Another former governor Dipendra Bahadur Kshetry said the constitution should contain a provision that NRB will look after the financial sector until state-level regulators become efficient. “The central government’s control mechanism should be developed until the state governments become capable of managing the sector on their own,” he said. 



Source: The Kathmandu Post