Kathmandu, March 28

Nepal Rastra Bank (NRB) has instructed the commercial banks to establish branches in every local unit where there is no bank branch, within this fiscal. Out of 753 local units, there are bank branches in only 394 local units till date.

Banks had already made a commitment to the central bank to establish branches in 243 local units after the local units were formed. Due to lack of bank branches in the local units, the reserve fund accounts of the local units are being operated from the district headquarters, however the law states that local bodies need to operate the reserve fund account through commercial banks.

Despite their commitment, commercial banks have not been expanding bank branches citing the lack of security and basic infrastructure like concrete building and fast internet facility, among others that are necessary to establish branches at the local level. The central bank today urged the banks to expand branches to the 243 local units where they have already made a commitment by mid-May.

Similarly, the central regulatory and monetary authority has named the local units where each bank has to expand its network in the remaining 116 local bodies based on the negotiations with the banks.

The central bank had urged the banks to expand branches through the monetary policy of this fiscal year, however, progress has been very slow. Banks have been struggling due to lack of loanable funds and have thus given less priority to branch expansion in this fiscal.

Due to the slow progress in expansion of branch network, the central bank has asked the banks to report to it about the progress in expansion after every fortnight. “We have asked them to report to the central bank every 15 days,” said Narayan Prasad Paudel, spokesperson for NRB, adding, “We hope the banks will be able to expand their branches as fixed by NRB and as per their pledge.”

The central bank also said that the banks will be penalised if they do not open branches as instructed as per the provision of the Nepal Rastra Bank Act.

The NRB has also said that the Ministry of Finance will coordinate regarding the security and infrastructure to facilitate banks to go to the local units. President of Nepal Bankers’ Association, Gyanendra Prasad Dhungana, has said that banks will expand their branches as per the instruction of the central bank if the government ensures security and proper infrastructure that are must for establishing branches.