BAFIA AMENDMENT Illiberal Act

The government has proposed harsh provisions to control the private sector banks

Sept. 30, 2019, 1:30 p.m. Published in Magazine Issue: VOL 13 NO 05 ,Sep.27 –17 Oct., 2019(Ashoj 10, 2076) Online Register Number DOI 584/074-75

Free press, open economy, liberalized banking sector; all of them seem to be disliked by NCP government. Although the government doesn’t tire preaching democracy and liberalization, its actions are taking other courses.

At time of a divided main opposition, NCP government finds it to be the right time to hit the liberal system giving sweeping power to the state in all the fronts.

Although the constitution of Nepal 2015 guarantees freedom of press, property rights and limited coercive power for the state, the government is citing the constitutional provision to make Nepal a socialist state to cover its action.

With excessive majority of two thirds in Parliament, the government has proposed a numbers of acts to control the liberal processes. At a time when the government has been making efforts to control the independent press through various acts, the recently tabled Bank and Financial Institution Act 2017 Amendment Bill has drawn another concern.

If the BAFIA amendment bill is passed without any amendment, Nepal’s private banks will lose their own independence and autonomy and they will turn into government controlled entities.

“This amendment bill is against the liberal economic policy of the country and against the spirit of free economy,” said former finance minister and leader of Nepali Congress Dr. Ram Sharan Mahat. “One after another, the government is pushing Nepal towards a state-controlled economy.”

The bill, among others, sets the age limits for board chair, members and CEO to 65, chairman should not be allowed to retain executive position, mandatory permission from Nepal Rastra Bank for dismissal and appointment of new CEO. With two terms tenure for CEO, all the authorities to pass the regulations will be with Ministry of Finance and Cooperatives of D level will be allowed to promote to development bank.

Along with intervening in the autonomy of private banks, the bill also encroaches the autonomy of Nepal Rastra Bank, taking some of regulatory work, including to direct the private banks.

“There is the need to retain the autonomy of Nepal Rastra Bank to protect the liberal economy,” said former governor Dr. Tilak Rawal. “Diminishing the autonomy of central bank will serve nobody’s interest.”

There are so many contradictions in the bill. If a person is allowed to make investment in the banks without barring any age, how can the regulations bar him to contest the election on the basis of age? “This is a ridiculous provision. If a ninety two year old person is allowed to get shares, how can the government say you cannot contest for the post of chairman and board member? This is against the constitution. Similarly, private bank is invested by private sector and the government cannot interfere here.”

However, Nepal Rastra Bank and Ministry of Finance are trying to impose their will against the right of the people. There is a fundamental flaw in the concept of the present government.

“Nepali Congress will oppose the clauses of the bill which are against the spirit of liberalization and against the free economy,” said former finance minister Dr. Mahat.

However, the government seems to be determined to bring the banking sector under its control. “In the name of autonomy and free economy, the government cannot allow misuse of property of the common people,” said an official of Ministry of Finance. “There is the need restriction and control to regulate the private banks.”

Former governor Deependra Bahadur Chhettri also holds the view that amendment of BAFIA will drastically curtail the autonomy of private commercial banks. The bill will ultimately reverse the 30 years long experiment of liberal economic system, which allows autonomy to private banks.

This will push Nepal from liberal to controlled economy, which contradicts with the constitution of Nepal.

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