Nepal Rastra Bank Governor discourages bank directors from dual role

KATHMANDU: The central bank governor reprimanded directors of financial institutions for their dual character — for acting like an industrialist while serving in a bank’s board.

“Bank directors are full of paradoxes. Those who are industrialists are not sure whether they want low or high interest rates. One day, they represent the banking community and explain their inability to lower rates while the next day they are demanding for lowered rates for industries,” said Nepal Rastra Bank (NRB) governor Dr Yubaraj Khatiwada, during the inauguration of the first ever Directors’ Conference organised by National Banking Training Institute here today.

“There are other conflicts of interest as well, such as promoter share holders are employed in the banks,” he added.

The regulator also urged the directors of financial intermediaries not to encourage unwarranted risk-taking for speedy profit that might deteriorate the financial health of the companies.

“It is the responsibility of directors to keep the company’s management in check and ensure corporate governance is followed but they should refrain from micromanaging everyday business,” he said.

“In recent times, the Nepali banking sector has been witnessing problems arising from lack of internal control and bad governance so directors should try to enforce ethics in the management,” added the governor.

Dr Khatiwada also told the directors to comprehend that they do not become owners of a company just because they have invested money in it. “Companies,

especially financial institutions, are not owned by the promoters or directors. The management and the board are equally responsible for the safety of the interests of depositors and creditors,” he said.

“Directors should not expect high profits in a short span because banking business does not yield overnight profits,” the governor added, emphasising on the need of banking and management knowledge for directors and not the ownership of bank shares.

Over 100 directors of listed companies attended the conference, aimed at creating a knowledge sharing platform. At present, there are 226 listed companies at Nepal Stock Exchange with a combined paid up capital of Rs 121 billion. There are more than 2000 board of directors governing these listed companies.

“Listed companies have different dynamics as compared to privately owned businesses and the governance of these companies requires advanced knowledge, skills and expertise preferably in the core areas of operation,” said chairman of Securities Board of Nepal Baburam Shrestha.

Insurance Board chairman Prof Dr Fatta Bahadur KC also stressed on the importance of constant dialogue between directors and management.

Source: The Himalayan Times, 18th April 2013
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Nepal Economic Growth Forecast at 4% according to UN

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Nepal Economic Growth Forecast at 4% according to UN

KATHMANDU: As the government and other agencies have been paring down the forecast for Nepal´s economic growth to 3.56 percent, the United Nations Economic and Social Commission for Asia and the Pacific (UNESCAP) has Thursday said growth would be maintained at 4 percent for the current fiscal year.

"A more realistic growth projection would be about 4 percent," reads a UNESCAP statement released here on Thursday. The UNESCAP, releasing its annual report on ´economic and social survey of Asia and Pacific 2013´, said political instability, frequent strikes and persistent labor problems, and severe power shortage are major reasons for low growth.

The report also touched the inflation of the country. "Inflation in Nepal is closely linked to inflation in India because of the fixed exchange rates between the currencies of the two countries," it said.

UNESCAP has highlighted labor shortage in the domestic market of Nepal and recommended some policy measures to take in order to accelerate economic growth. "In order to realize its development potential, Nepal will have to overcome a number of development challenges such as infrastructure gaps and energy insecurity," reads the report.

Similarly, UNESCAP has suggested the government address some deepening problems like poverty, hunger, and rising inequality, among others. "The services sector of the country is having a faster growth compared to other sectors of the economy," the report outlines. "South Asian countries face growing energy demand, and a number of energy challenges."

Meanwhile, there are some suggestions in the macro economic policy front of Asia Pacific countries. "A job guarantee program, a universal and non-contributory pension for all aged 65 or older, increasing public expenditure in health sector and addressing energy problems required to be managed through macro economic policy adjustments in the economy," highlights the report.

Source: myrepublica, 18th April 2013
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Registration of new firms in Nepal doubles

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Registration of new firms in Nepal doubles

KATHMANDU: Political instability and acute power shortage have not dampened investors´ mood if latest data of Department of Industry (DoI) is anything to go by. Registration of new industries has doubled over the first nine months of fiscal year 2012/13, compared to figures of the same period of last year.

Statistics of DoI shows 298 firms were registered during the period, up from 184 registered in the corresponding period of the last fiscal year. “New investment commitment amount has increased by 78 percent to Rs 81.32 billion during the period,” the statistics shows.

If the investment commitment is anything to go by, it will create 23,799 new jobs in the country.

“We don´t have statistics of the approved investment due to lack of human resource at the department,” a DoI official told Republica.

Almost 50 percent of the newly registered firms are of small scale. “Only 86 large and 64 medium scale firms were registered in the review period,” the statistics shows.

Industrialists, however, have termed the healthy rise in the registration of new firms as unnatural. “Gauging the existing business doing investment in the country, the trend is somewhat unnatural,” Pashupati Murarka, vice president of Federation of Nepalese Chambers of Commerce and Industry (FNCCI), said. “Looking at the situation of the country, I don´t think these firms will inject fresh investment immediately. They must be in wait and watch mood.”

DoI officials do not have any clue why registration of firms increased despite economic slowdown in the country.

According to the statistics compiled by the Ministry of Finance (MoF), the contribution of manufacturing sector in gross domestic product (GDP) is stood at 6.2 percent in 2011/12 - the lowest in the last decade.

Source: myrepublica.com, 18th April 2013

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Nepal Inflation at 10.2 percent in March 2013

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Nepal Inflation at 10.2 percent in March 2013

KATHMANDU: A sharp hike in prices of key food items, clothes, footwear, and housing and utilities cost pushed inflation to 10.2 percent in March as against seven percent reported in the same period last year.

The inflation recorded in the period was 0.7 percentage point higher than the revised annual target of 9.5 percent.

On average, prices of food items shot up by 11.3 percent, while prices of non-food items went up by 9.3 percent in March, the latest macroeconomic report of Nepal Rastra Bank made public on Tuesday shows.

Prices of cereal grains and their products, which contribute to 14.81 percent to the inflation basket, rose by 12.9 percent during the month, while prices of meat and fish soared by 17.1 percent. Similarly, ghee and oil became dearer by 13.9 percent and prices of legume varieties increased by 12.6 percent in the same period.

Among non-food items, prices of clothes and footwear went up by 11.5 percent, while housing and utilities cost increased by 9.7 percent in March. Similarly, education cost soared by 12.5 percent and transport cost went up by 8.4 percent in the review period.

Data show consumer prices increased by 10.8 percent in Kathmandu Valley followed by 10.2 percent in the Terai and 9.6 percent in the hilly region of the country in March.

Inflation has remained on the higher side so far this year because of lower agricultural harvest, wage pressures, hike in fuel prices, continued power shortages and supply-side constraints like presence of layers of intermediaries and black marketeering.

It is said supply-side constraints, depreciation of Nepali rupee against major currencies as in the recent case, rising wages and structural problems like lack of or low quality of infrastructure make two-third contribution to price hike in the domestic market. The rest is attributed to rising prices in India, from where Nepal imports most of its goods.

Despite double digit hike in consumer prices, wages increased by only 7.8 percent in March, with agricultural laborers witnessing 12.5 percent hike in wages. Wages of construction workers, on the other hand, went up by 8.1 percent in March, while carpenters saw their wages go up 6.1 percent.

Those working for the government, public corporation and banks and financial institutions, meanwhile, were biggest losers in March as they did not see any hike in their salaries.

Source: myrepublica, 16th April 2013

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Gold Price Falls by Rs.3000 in Nepal

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Gold Price falls by Rs.3000 in Nepal

KATHMANDU: Gold price saw a further slide on Tuesday by Rs 3,000 per tola (11.664 grams). With the decrease, the yellow metal will now cost Rs 49, 500 per tola.

On Monday, the price of the yellow metal had decreased by Rs 3,300 per tola in the domestic market as investors fled from bullion to other safe-havens in the international market.

The yellow metal was traded at two-year low of Rs 52,500 per tola on Monday. Gold had hit Rs 52,490 per tola in August, 2011. It climbed to all time high of Rs 61,850 on November 25, 2012.

Gold fell to $1,450 per troy ounce in the international market on Saturday, down from $1,560 per troy ounce recorded on Friday. Though daily demand for gold hovers over 30 kg, Nepal Rastra Bank (NRB) is supplying only 15 kg a day through designated commercial banks.

“The drastic drop in price is due to the drop in gold prices in international markets as investors are fleeing from commodities market and investing on property, equity and fixed deposits where the rate of return is high,” Mani Ratna Shakya, president of Federation of Nepal Gold and Silver Dealers´ Associations, said. “Strengthening US stock market and economy due to Euro and Cyprus issues is the other reason behind investors´ shift.”

The massive drop in gold price led to rise in demand for the yellow metal on Monday. According to Shakya, demand for gold increased by around 5 kg on the day. “Many investors are in wait and see mood expecting further drop in prices,” he added.

Source: myrepublica, 16th April 2013

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NRB Relaxes Know Your Customer Rules

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NRB relaxes Know Your Customer rules

The Nepal Rastra Bank has allowed banks and financial institutions (BFIs) to determine themselves the requirements that customers have to fulfil while opening bank accounts with deposits less than Rs 500,000.

Moreover, people can also open bank accounts by producing photocopies of passport, permanent account number (PAN) cards, identity cards of government, public and private offices. In case of teachers, professors and other staff of government schools, colleges and universities, they can open accounts by producing photocopies of their identity cards provided by the institutions they are working, states new “Know Your Customer” directive issued on Friday.

The revised directive has also removed the earlier provision that required individuals to produce citizenship number of ancestors going back to three generations, limiting the requirement to disclosure of personal information and names and surname of three generations.

“The new KYC directive has surprised me because the NRB has given us more than what we wanted,” said Ashoke Rana, chief executive officer of Himalayan Bank Limited. “This has enabled all to open accounts. This will help increase the number of bank accounts.”

The central bank’s move came after complains from BFIs that the previous provisions caused sharp decline in new account opening and even old depositors started closing their accounts.

“The move was taken to ease account opening and is based on international practices,” said NRB Spokesperson Bhaskarmni Gnawali. “We simplified the provision after consultations with the Financial Information Unit (FIU), which looks after money laundering issues.”

According to the NRB directive, this provision is only applicable to those willing to open new accounts. Existing accountholders will not have to produce new documents. Gnawali, however, said the provisions for foreigners have not been revised.

President of Nepal Bankers’ Association Rajan Singh Bhandari welcomed the NRB move, saying it would encourage account opening at a time when existing accountholders were also seeking to close their accounts due the lengthy re-verification process. “Letting people open bank accounts by producing documents other than citizenship certificates is a welcome move. Such practices are prevalent in the US and Europe too,” he said.

Source: ekantipur.com, 6th April 2013

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