June 7: Stakeholders have expressed their concerns over the proposed parliamentary endorsement of Bank and Financial Institution Act (BAFIA) bill. The bill was recently approved by the Finance Committee of Legislature-Parliament with some member of parliament forcefully incorporating their interests in the amendment. Experts warn that if the bill gets endorsed as it is, it will create havoc in the country’s banking system. “Banking sector have to face risks if the bill gets parliamentary approval without amendments on some provisions approved by the Finance Committee. Such provisions were included in the bill due to some Members of Parliament (MPs) who are also bank directors and members of the Finance Committee,” says Former NRB Governor Dipendra Bahadur Chettri.

Chettri was speaking at an interaction program organised by the Society of Economic Journalists-Nepal (SEJON) on Monday. He added that promoters who do not have basic understanding of the banking sector, but are rushed to open banks after having some money has created risks in the industry. The preliminary draft of the bill had set two-term limit for the Chairman and director of the bank. It was set so due to the possible risk of manipulation, if the same individual stays in the post for the long period. However, the Sub-Committee formed under Chairmanship of MP Deepak Kuinkel submitted a report recommending removal of the provision to the FinanceCommittee. The committee on May 24 passed the bill as per the recommendation of the Sub-Committee.

The bill has been criticised for including provision where individuals who were earlier penalised for their actions against business discipline can also become directors and chairman of BFIs. Similarly, it also has provision including long-term appointment of bank directors. The draft amendment has set a five year term limit for bank CEOs which was earlier four years.

Likewise, the Sub-Committee has also recommended removing a provision that bars individuals from having any top position in the BFIs who owns above 50 percent ownership in any firm or company taking loan from any BFIs.

However, MP Kuinkel says that the provisions included in the bill are amendable. “We had to approve the amendments because there was a risk of bill stuck at the parliament if the suggestions of some MPs (bank directors) had not been incorporated,” he said, adding, “Even if the bill gets endorsed as it is, it can be amended later.”