NRB Firm To Control Financial Crime: Governor Khatiwada

NRB Firm To Control Financial Crime: Governor Khatiwada

May 11, 2014, 5:45 p.m. Published in Magazine Issue: Vol: 07 No. -21 May. 9- 2014 (Baishakh 26, 2071)

"Nepal Rastra Bank has adopted a zero tolerance policy against financial crime," said Governor Yubaraj Khatiwada.

The statement came when misdeeds in the financial sector have swelled in recent years along with an increase in the number of financial institutions. Several companies have become crisis-ridden as a result of the transgressions of their operators, many of whom have landed in jail for embezzling public deposits.  

"The NRB has been working on reforms in the financial sector to ensure that it runs efficiently and in a transparent manner," said Governor Khatiwada. The central bank has recently taken measures requiring banks and financial institutions (BFIs) to provide greater disclosure. It is also planning to introduce a new NRB Act enabling it to liquidate crisis-ridden BFIs and revamp the Bank and Financial Institution Act to give greater power to the central bank.

“However, NRB has adopted the policy of maintaining a solid footing in the present situation. A time will come when it will have to look forward and not remain in its present position,” he said."We were forced to impose a cap on the spread rate since the market failed to correct the huge gap between interest rates of deposit and credit.”

The central bank has asked banks and financial institutions (BFIs) to bring down their spread rate to below 5 percent within the current fiscal year. As of mid-March, the spread rate is 6.7 percent.

At a time when international institutions, including World Bank and International Monetary Fund, have shown concerns over the cap on spread rate claiming that it could affect BFI’s profitability and capability to withstand shocks, the governor expressed his firm stance that the central bank should take appropriate decisions when the market itself fails to do so. Given that the base rate has been reduced, the governor said that the interest rate on credit should also go down. As of mid-March, the average base rate is 8.6 percent.  “Various recommendations have been made but we will only look at practical alternatives and discard the old ones,” said the governor.

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