Kathmandu, September 2:

National and international experts gathered here today have underlined the fact that judiciary could play a crucial role in strengthening the process of financial sector reform on a sustainable basis.

Chief justice Dilip Kumar Poudel, speaking at the programme on the “Role of Judiciary in Financial Sector Reform”, organised by the Supreme Court and Nepal Rastra Bank (NRB), said that with the expansion of the financial system and advent of new, faster technologies like electronic transfer of funds, rise in financial crimes like money laundering, tax evasion and large scale forgeries has also become more evident. Under such a context, timely improvement and enactment of new laws are absolute imperatives, Poudel said. He also stressed on professional and vigilant financial actors for effective functioning of the financial system.

Poudel also informed that the National Judicial Academy has been established to impart trainings inter alia in the area of banking and commercial laws. He was of the opinion that judiciary and the financial sector have to be more pragmatic in placing their expectations on each other. He suggested that banking practices must become more professional and merit based.

Lending must not be based on other than the credit worthiness of the borrower. Similarly, it is the responsibility of the banks to recover the amount they have lent out and if there is any malpractice, in-house action against the person in charge should be initiated, he added.

The general tendency of shifting the responsibility of recovery on judiciary alone will not put the financial sector in the path of reform, said Poudel.

Governor of Nepal Rastra Bank (NRB), Bijay Nath Bhattarai said that non-performing assets of the two largest public sector banks – Nepal Bank Ltd and Rastriya Banijya Bank (RBB) remains the biggest challenges. He said that to prevent our financial system from disaster, there is no alternative but to rescue these two banks from becoming dysfunctional.

“The entire mechanism should be geared to make wilful defaulters pay back the amount they have borrowed from our banking system,” governor Bhattarai stressed. As the money taken by wilful defaulters is the public money, it must be paid back at any cost, the governor strongly reiterated.

The governor said that the role played by the different judicial and quasi-judicial bodies in recent years has facilitated the process of reforms and to control financial irregularities. Management reforms in two public sector banks (RBB and NBL) and central bank have helped us to redirect the banking culture towards more professional, technology-based and free market oriented practices, said governor Bhattarai.

Mudassir Khan, a Pakistani expert presenting a paper on ‘Judicial Support in Financial Sector Reform: A Pakistani Experience’ said that effective regulations from central bank, good corporate governance, effective implementation of rules are needed for effective financial reforms. After the successful financial sector reform in Pakistan, the financial sector there is getting vibrant and effective, said Khan while talking about Pakistani experience.