– Rishab Gautam
The umbrella organization of commercial banks, ‘Nepal Bankers Association’, has recently got new leadership. Machhapuchhre Bank CEO Santosh Koirala has been elected as the new president of the Bankers Association. What role will the new Bankers Association formed under Koirala’s presidency play? Or should it play? What is the future work of the Bankers Association? This article focuses on that topic.
Basically, banks themselves are not regulatory bodies. Therefore, the Bankers Association is not a regulatory body. The Bankers Association was born specifically to organize banks to present their voices, issues and rights and interests to the stakeholders. Although the umbrella organization of a total of 20 commercial banks that hold the reins of the country’s capital, it is certainly a powerful organization, although not a regulatory body. The role of this organization is to encourage the country’s capital investment in the right direction, how to build the relationship between customers and banks, how to minimize unhealthy competition, and to discuss short-term and long-term problems and bring them to the regulatory body, Nepal Rastra Bank. Therefore, the Bankers Association is an important organization, even though it is not a regulatory body.
When the leaders of this organization can demonstrate their capabilities, the relationship between banks and customers, the relationship between banks and the government, and the relationship between banks and the regulatory body, Nepal Rastra Bank, can be strengthened. Not only that, the Bankers Association can play a leading role in creating investment priorities for banks in a way that supports the country’s economy. For example, in an underdeveloped country with a weak economic situation like ours, gradually attracting capital to productive sectors benefits the country. Which simultaneously creates employment opportunities. If the capital of commercial banks can be channeled mostly to potential sectors such as agriculture, manufacturing, industry, tourism, and hydropower, it can contribute to economic growth and the economy. The Bankers Association can play that role or bridge work.
The Bankers Association needs to move forward with a broader mindset rather than focusing only on the small and big problems they face. After the new constitution was passed and the country moved to a federal structure, the governments have raised the slogan of ‘Prosperous Nepal, Happy Nepali’. In such a situation, the role of banks in making the country prosperous becomes important. If their investment can be made in the right place, the country can prosper. Therefore, the new working committee of the Bankers Association should work with a broad concept. Banks are not private institutions of certain individuals, but are a common institution with the investment of thousands of investors. Therefore, the thinking and concerns of banks should be broad. In this way, banks are connected to people from all sectors, levels, and classes in a diverse manner. They engage and collaborate with all kinds of communities and people.
As a result, they need to move forward with a broader concept. Banks should focus their activities on the interests of unlimited customers, stakeholders, and shareholders, not on the agenda of limited self-interest. Nepal Rastra Bank should play a role in making the laws and guidelines made for the financial sector progressive and focused on the interests of banks. Banks are the bodies that implement the monetary policies, laws, rules, and guidelines brought by the Rastra Bank, while the Rastra Bank is the body that makes and implements policies. Therefore, the Nepal Bankers Association can play a role in providing the right suggestions to the Rastra Bank through in-depth discussions to make the right and necessary policies. And, the new working committee should focus itself on that.
Every budget brought by the next government is linked to banks. However, some good programs that the government wanted to implement through banks have not been implemented because the banks could not take a little risk and courage. For example, when educational unemployment is increasing in the country, the government is occasionally introducing programs through the budget to provide loans to entrepreneurs on the collateral of educational certificates. These are good programs that have been practiced abroad.
However, the effective role of banks in implementing such programs has not been seen in the past. Due to banks being afraid and the Rastra Bank not providing the necessary facilitation, even good programs that came through the budget have not been implemented. The role of the Nepal Bankers Association can be to implement such programs. Which plays a role in promoting economic activities by increasing employment and production in the country. As a result, when economic activities increase, enterprises and commercial activities increase, the business of banks will eventually expand. Their scope will be broadened. Therefore, it is necessary for the new working committee to take forward the work in a new way.
The basis for the survival of banks and the progress of the economy is the development of the industrial sector. Remittances are not becoming permanent. It is said that more than 6 million young people have now emigrated. The contribution of domestic industries and businesses to the overall economy is not more than 6-7 percent. The country seems to be a country that produces workers entirely. Industrial development has not been achieved through the mobilization of skills, labor, resources and capital. In that sense, banks seem to be hesitant to invest in the industrial sector, agriculture, production and industries. Industrialists or businessmen are a means of capital formation for banks. An industrialist does not open only his own account in a bank. Accounts are also opened for his employees and workers. Industrialists keep the economic activities of the state moving through import and export. Therefore, the relationship of banks with industrialists and businessmen is more important and should be more important.
In the past, the relationship between banks and customers was that of mere creditors and tenants. That perception has gradually changed. Banks have equal responsibilities towards society, customers, the government, and the development of industries and factories, which have increased. In Nepal, especially the industrial and business sector is weak, and the size of the business in that sector has not been able to increase, so banks are not able to trust that sector. However, now, as banks in Nepal have expanded their development and expansion, investment in productive industries and businesses should be expanded accordingly.
The relationship between banks and businessmen has not been very cordial for a few years. However, with the continuous decrease in loan interest rates in the last few months, the relationship between banks and businessmen has started to improve. However, the business morale of entrepreneurs and businessmen who have been affected by the impact of the Corona epidemic and the economic recession has not increased. Even though banks have more than 6 trillion liquidity today, businessmen have not gone to the banks to ask for loans. In the past few years, banks used to be hit by a liquidity crisis as soon as Mangsir began. That process continued for many years. However, in previous years, many of the country’s largest cooperatives went bankrupt, and as the cooperative sector fell into the clutches of fraudsters, the deposits that went to that sector have returned to the banks. That is why liquidity has increased in banks. When the NRB became a little stricter, banks presented themselves in the same way in terms of collecting interest and installments through borrowers, which has deteriorated the relationship between banks and businessmen. The Banks Association should play a role in refreshing it and moving it towards cordiality.
Even two years ago, businessmen used to protest from time to time regarding the interest rates of banks. Businessmen used to beg the Prime Minister to reduce the interest rates of banks from time to time, saying that they were high. That movement was mainly due to the lack of a strong relationship between banks and businessmen. Only when there is a very cordial relationship between these two parties can the industrial sector achieve progress. Only when the industrial sector progresses, their transactions with banks will increase and the profits of the banks will also increase. However, there is no harmony here. Banks have not been able to think long-term.
They are enjoying short-term achievements and profits. They have not thought about strengthening the domestic economy by providing loans at concessional interest rates to productive industries. Only with that thinking can the profits and activities of banks be sustainable in the long term. Therefore, the Bankers Association should come forward as a bridge to reconcile many unresolved issues.
The new working committee led by Santosh Koirala, where Global IME Bank CEO Surendra Raj Regmi is the vice-chairman, Prabhu Bank CEO Ashok Sherchan, Sanima Bank CEO Nischal Raj Pandey, Prime Bank CEO Sanjeev Manandhar, Siddhartha Bank CEO Sundar Prasad Kandel, Kumari Bank CEO Ramchandra Khanal, Everest Bank CEO Sudesh Khaling and Nepal Bank CEO Tilak Raj Pandey are the working committee members. Similarly, outgoing chairman and NMB Bank CEO Sunil KC is an ex-officio member of the working committee, while former chairmen Himalayan Bank CEO Ashok Shamsher Rana and Nabil Bank CEO Gyanendra Prasad Dhungana are the new working committee advisors. May the Bankers Association fulfill its responsibilities effectively. Best wishes.
(Gautam is an economic writer and analyst. His book ‘Maulik Udhamsa’ has recently been published.)
