Governor raps banks for credit crunch

KATHMANDU: Nepal Rastra Bank Governor Chiranjibi Nepal has urged banks and financial institutions to maintain discipline and explore prospects of luring deposits before making commitments for new loans.

Inaugurating the new head office of Global IME Bank here on Tuesday, Governor Nepal criticised the management heads (CEOs) of banks for being short-sighted while planning their portfolios and only looking for profits.

“Bankers are supposed to be patient as haphazard loan expansion will not support them to move ahead,” said Nepal. “NRB will take action against banks that breach permissible CCD level.”

He further alleged that the banks have been expanding loans on assumption that the central bank will consider the ‘difficult situation’ claimed by the bankers, and said that the central bank will, however, not tolerate breach of rules.

Citing there is liquidity of Rs 43 billion in the system, the governor urged public not to panic as it is just the crisis of loanable funds and not liquidity crunch.

Governor Nepal also informed that the central bank is in discussions with the Ministry of Finance to provide some way out to address the ‘temporary problem’ of credit crunch.

“Banks have to be prudent and not expand loans rampantly in non-productive sectors for high returns to please their board of directors,” said the governor.