CIBFIN’s Demand to Withdraw the Directive Regarding Blacklisting, also Dissatisfied with the Arrangement of Counter Cyclical Buffer

Kathmandu : The Confederation of Banks and Financial Institutions Nepal (CIBFIN) has demanded the withdrawal of the latest instructions issued by the Central Bank regarding blacklisting. At the time when the first quarter review of the monetary policy of the current financial year is about to be made public, CBIFIN has submitted various 17-point suggestions and made such a demand.

In point number 16 of the suggestion it is mentioned that since the instructions issued by the Central Bank are in conflict with the Bank and Financial Institutions Debt Recovery Act, 2058 and the Civil Code it should be returned immediately.

Similarly, CBIFIN has also suggested to postpone the counter cycle buffering implemented from this financial year. The previous demand to implement the provisions of the Bank and Financial Institutions Act (BAFIA), which gradually converts founder shares into common shares has been reiterated.

Likewise, CIBFIN also demands to maintain uniformity in the market price of founder shares and ordinary shares.

Recommendations given by CBIFIN regarding monetary policy review

1. The provisions of the Bank and Financial Institutions Act (BAFIA) which will gradually convert founder shares into common shares should be implemented. It seems that the implementation of such a system will directly help in building and operating sufficient capital.

In addition to keeping uniformity in the market price of founder shares and common shares, in the case of founder share loans such as ordinary share loans, the average price of the last 180 working days published by Nepal Stock Exchange Limited or the prevailing market price of the shares, whichever is lower, shares only up to 70 percent of the value. A provision should be made that mortgage loans can be provided.

2. A double interest rate system should be implemented so that the interest rate of loans flowing in productive, employment and export sectors is cheaper than the interest rate of loans flowing in the commercial sector. It seems that such an arrangement will encourage active industrialists/businessmen in the productive sector, speed up economic activities, increase productivity and provide great support in import substitution and export promotion, and will also have a positive effect on the development of entrepreneurship and creation of employment opportunities.

Similarly, for the purpose of calculating the Capital Adequacy Ratio in the case of non-production loans, the specified risk weight should be reduced by 50%. Such an arrangement seems to be of great help in extending credit to the productive sector and making the economy sustainable.

3. In order to reduce the pressure on the interest rate in the current situation, it would be reasonable to reduce the current bank rate of 7.5% by 1%. This will help to reduce the pressure on Central Bank and banks and financial institutions and to stop all-round attacks.

4. In view of the contraction in the business of banks and financial institutions, it seems appropriate to postpone the arrangement of Counter Cyclic Buffer of 0.5% which will be implemented in the middle of B.S. 2024.

5. A provision should be implemented that deposits with a term shorter than 1 year cannot be counted in maturity. The provision of making short-term term deposits has a direct impact on the expansion of long-term loans as savings deposits are converted into term deposits.

6. Cash Reserve Ratio should be replaced by Net Liquidity Ratio and more flexibility should be provided to banks and financial institutions.7. The Low Value individual criteria for calculating the Regulatory Retail Portfolio is Rs. From 1 crore to Rs.2 crore should be raised.

8. In order to achieve the target of 11.5 percent in credit expansion, it would be appropriate to establish more flexible arrangements in terms of capital adequacy risk bearing and sectoral limits.9. Arrangements should be made to provide re-loan facilities for providing cheap loans targeting production-oriented/employment-oriented/export-oriented industries and hospitality sector.

10. For good loans, the loan loss provision should be maintained at only 1 percent.11. In the current situation of unexpected increase in bad loans of banks and financial institutions, the provision that NPA should not exceed %Ü when taking deposits of Central Bank should be removed.

12. In the recovery process of bad loans, the bank should maintain the provision of Capital Gain Tax only when the securities are sold and not when they are sold.

13. A clear provision should be made that the non-banking assets that are registered in the name of banks and financial institutions cannot be returned in the case that the entire process has been completed and transferred to the name of a third person in accordance with the prevailing law.

14. When the non-banking property registered in the name of a bank and financial institution is transferred to a third person after completing the entire process in accordance with the prevailing law, the relevant land office raises the issue of land limitation and does not transfer the name, an initiative through Central Bank for a clear provision that land limitation does not apply in the case of banks and financial institutions. should be done

15. The responsibility of determining the limits of current capital loans should be given to banks and financial institutions. In the same way, although the current capital loan guidelines are very important, the country’s environment, needs, time-relevance and potential impact should be discussed widely among the stakeholders and immediate steps should be taken to improve the currently irrelevant arrangements.

16. The provision made regarding blacklisting of the guarantor should be withdrawn immediately as it is in conflict with the laws and regulations mentioned in the list.

– Banks and Financial Institutions Debt Recovery Act, 2058 Section 2 (g) states that “debtor” means a person who takes a loan from a bank and financial institution, a firm, company and an organized organization established in accordance with prevailing laws and the term also refers to a person who gives a surety. said

– Section 564 sub-section (1) of the Civil Code states that the obligation of the person giving the surety is created when the person who has to fulfill the obligation is unable to fulfill such obligation.

17. At present, the arrangement of showing interest income on accrual basis and paying tax on that basis should be amended and provision should be made to show interest income only on cash basis.