Labour bank under BAFIA in offing

Kathmandu, August 16

The Ministry of Labour and Employment (MoLE) is mulling over establishing a labour bank under the existing rules rather than enacting a new law as planned earlier. The ministry’s proposal in this regard is under consideration of the Ministry of Finance (MoF) for the last two months.

After the MoF rejected a proposal to establish a labour bank through a separate law, MoLE had proposed to set up the bank under the existing Bank and Financial Institutions Act (BAFIA). As per MoLE officials, they had submitted a proposal including memorandum of association and regulation to operate the bank.

Earlier, the bank establishment plan had set a target to provide financial services to workers, carrying out worker welfare schemes, and channelising remittance money to national productivity. If the MoF gives the go-ahead, the bank to be established will not be any different from other banks being operated in the country. MoF is yet to officially respond to MoLE regarding the matter.

“The bank will bear the name of Labour Bank but its functions will be the same as other commercial banks if the MoF approves our proposal,” said Raghu Raj Kafle, executive director of the Foreign Employment Promotion Board (FEPB).

Through the budget for fiscal year 2014-15, the government had revealed a plan to conduct a study to open a labour bank with investment from employers’ organisations, workers and the government. A study team under the coordination of Ramesh Koirala, advisor of MoLE had concluded of a possibility of operating the bank under a separate law after consultations with officials of Nepal Rastra Bank and Bankers’ Association of Nepal. But, this plan was not accepted by the MoF.

In the new proposal, the government has been suggested to invest 51 per cent and leave 49 per cent share for others. As per the new provision fixed by the monetary policy, a resource of Rs eight billion is required as paid-up capital to establish a bank. Earlier, the paid-up capital threshold was at Rs two billion and the proposed labour bank was planned to be established with paid-up capital of Rs five billion.

On behalf of the government, MoF and National Level Welfare Fund (NLWF) established under the Bonus Act, and Foreign Employment Welfare Fund (FEWF), among others can invest in the labour bank, as per officials of MoLE. However, it will not be easy to directly invest money of funds like NLWF and FEWF without changes to the fund operation and management rules.

Reports say that there is resource of around Rs 100 billion stocked in various welfare funds including more than Rs eight billion at the NLWF, over Rs three billion in FEWF, and Rs 10 billion in the Rural Telecommunication Development Fund. Reportedly, there are huge resources also in Nepal Army Welfare Fund, Social Security Fund, Nepal Police Welfare Fund and Environment Protection Fund.