HIMALAYAN NEWS SERVICE
KATHMANDU: The Nepali financial system will soon go through a second phase of financial restructuring that will aim at consolidation, stability and increased accessibility of the financial system.
“We are discussing the matter of financial restructuring with donor agencies such as International Monetary Fund (IMF), World Bank (WB) and Asian Development Bank (ADB) which will not only focus on strengthening certain financial institutions but will improve corporate governance, stability and quality of financial services as a whole,” informed governor of the central bank Dr Yubaraj Khatiwada at the 57th anniversary celebrations of Nepal Rastra Bank (NRB) today.
The first phase of financial system restructuring was completed in 2011 in which WB funded the reformation of NRB and two government promoted banks –– Nepal Bank and Rastriya Banijya Bank –– that badly needed a shake-up for survival.
The problems plaguing the financial system at present are not out of control and can be handled, he said, pointing out the improved economic situation. “The growth rate is comfortable –– agriculture, service and industrial sectors have all registered exciting growth, and most importantly, inflation is at the targeted rate of seven per cent,” he said.
Moreover, balance of payments is at a surplus of Rs 80 billion –– the highest ever with foreign reserves enough to cater to imports for 10 whole months. The foreign exchange reserve is rich with Rs 368.1 billion.
“Not only remittance, but NRB’s attempts at plugging the possible areas of foreign reserve leakages has also been successful,” expressed Dr Khatiwada, adding that NRB is going to tighten foreign exchange with additional regulations.
However, trade deficit is still at large with a growth rate of 17 per cent till the eight months of the current fiscal year. The high import of petro-products has led to an overall import increase by 17 per cent while exports rose by 14 per cent only.
Broad money supply has increased by 12 per cent by the eighth month, which, according to the governor, is something to watch out for by the monetary authority as it might pressurise inflation.
The governor also pointed out the success of NRB’s attempt at encouraging mergers among financial institutions. “After announcing merger regulation last year, three pairs have merged, eight pairs have obtained Letter of Intent and three pairs have applied for the process,” he said.
Former governor of NRB Ganesh Bahadur Thapa pointed out the need for the central bank to be more vigilant regarding its supervisory roles to protect the public. NRB’s employee unions also expressed the need to strengthen NRB’s organisational structure.