Nepal Rastra Bank (NRB) governor Yuba Raj Khatiwada has said that the central bank was encouraging mergers between banks to minimize the cost and optimize efficiency of the banking system.
Khatiwada holds the view that a high number of financial institutions do not ensure healthy competition. According to him, many banks might be indulging in unhealthy competition thereby leading to a decline of productivity. Addressing an event on ´Reforms, Incentives and Banking Sector Productivity: a Study of Nepal’, Khatiwada said liberalization creates an enabling environment for efficiency in the economy. According to him, liberalization is a necessary condition for efficiency. However, it may not be sufficient as other factors also play key roles in increasing production.
Likewise, presenting his research report, Professor Kul Bahadur Luintel of Cardiff University said bankers have become motivated, following deregulation and reform. “Their effort has gone up by almost 50 percent in 2011 compared to the levels in 2003/2004,” he concluded.