KATHMANDU: The parliamentary Finance Committee said it would hold a final round of discussions with the finance and law secretaries and central bank officials before amending controversial provisions in the Bank and Financial Institution (Bafi) Bill. “We will call the finance and law secretaries and officials of Nepal Rastra Bank soon, following which changes will be made to the Bafi Bill,” said Prakash Jwala, chairman of the committee.
“The revised Bafi Bill will then be tabled in Parliament,” Jwala added while speaking at the committee’s meeting on Sunday which was attended by former finance ministers and central bank governors. The Finance Committee restarted deliberations on the Bafi Bill on Friday. The previous government had pulled the bill from Parliament following criticism from a wide cross section of society over changes in crucial provisions that had been included to strengthen corporate governance at banks and financial institutions and reduce conflict of interest.
During Sunday’s discussion at the Finance Committee, former finance minister Bishnu Poudel blamed Finance Minister Ram Sharan Mahat for changing the provision on converting promoter shares to ordinary shares. “When Nepal Rastra Bank sent the draft bill to the Finance Ministry, there was no provision on converting promoter shares into ordinary shares,” said Poudel.
“I have no idea why Mahat inserted the provision that allows promoter shares to be converted into ordinary shares after a 10-year lock-in period. The Finance Committee then reduced the period to seven years before forwarding the bill to Parliament. This was unnecessary.”
Poudel urged the committee to table the bill in the form drafted by Nepal Rastra Bank (NRB). Although Mahat didn’t speak during the committee meeting, he later told the Post that the provision had been added in a bid to pave the way for promoters to quit the institution they have established after a certain number of years.
“Nowhere in the world are shares categorised as promoter and ordinary shares,” said Mahat. “Our laws should also comply with international standards.” Similarly, former NRB governors criticised the removal of term limits for bank chairmen and directors from the bill. “The practice of people holding the position of chairman and director for an indefinite period has affected governance in banks and financial institutions in the past,” said Yubraj Khatiwada, former governor of NRB.
“If the provision that limits the tenure of chairmen and directors is removed from the bill, it is highly likely that corporate governance in banks and financial institutions will deteriorate in the future.” He also criticised the removal of the provision forbidding individuals holding constitutional posts from becoming bank directors.
Former NRB governor Dipendra Bahadur Chettri said the financial sector would face anarchy if the bill was forwarded to Parliament without making changes to the controversial provisions. “A few lawmakers who are also bankers flexed their muscle to ensure their perpetual hold over their banks,” said Chettri. “I urge the committee to make amendments for larger financial stability.” The Bafi Bill, after it becomes law, will serve as a legal framework to monitor, regulate and supervise operations of banks and financial institutions.
