KATHMANDU: Deputy Prime Minister and Finance Minister Krishna Bahadur Mahara has called on the parliamentary Finance Committee to expedite the process of amending the Bank and Financial Institution (BAFI) Bill and re-table it in the House for final endorsement.
Speaking at a committee meeting on Tuesday, he also urged it to make amendments following the spirit of the initial draft of the bill prepared by Nepal Rastra Bank (NRB). “The Finance Ministry and NRB are on the same page regarding the BAFI Bill,” said Mahara. “As our financial system is not mature enough to conduct self-regulation, we must have stringent provisions in place to prevent anomalies.” The bill invited controversy after the then finance minister Ram Sharan Mahat made a number of changes to the draft submitted by NRB before forwarding it to the Finance Committee.
The bill sank deeper into controversy after the committee removed some key provisions designed to ensure proper corporate governance before tabling it in the House. Mahat had inserted a provision allowing promoter shares to be converted into ordinary after a 10-year lock-up period in the draft bill sent by NRB to the Finance Ministry.
The Finance Committee reduced the lock-up period to seven years before tabling it in Parliament. The House panel also removed the term limit of bank chairmen and directors, a move which drew sharp criticism. Bowing to intense pressure from various stakeholders, the government in an unprecedented move decided to return the bill to the House committee for further discussion. That was four months ago, and no headway has been made regarding the amendment since then.
NRB is adamant that there should be no major changes to its draft. Lawmakers are divided over the contentious provisions in the bill. Mahat defended his move to include the provision saying it would enable promoters to quit the institution they have set up after a certain period. “Nowhere in the world are shares categorized into promoter and ordinary shares,” said Mahat. “Furthermore, entrepreneurs are very rare in Nepal. Therefore, it is unwise to tie them to their promoter shares perpetually.”
Meanwhile, NRB Governor Chiranjibi Nepal criticised the committee’s move to remove the term limit of bank chairmen and directors. “Allowing people to keep their post as chairman or director for an indefinite period has affected the overall good governance of banks and financial institution in the past,” said Nepal. “If the provision that limits their terms is removed from the bill, it is highly likely that it will happen in the future too.” He also criticized the removal of the provision barring individuals holding constitutional posts from becoming bank directors. Speaking at the committee meeting, Nepal gave an example of debt-ridden Indian business tycoon Vijaya Maliya who was a member of the Indian Upper House, and said such incidents could happen in Nepal too if bankers were allowed to hold constitutional positions.
Committee Chairman Prakash Jwala said the panel would soon reach a conclusion and requested the finance minister to be present at every committee meeting before the amendment is completed. The BAFI Bill, once signed into law, will work as a legal framework to monitor, regulate and supervise operations of banks and financial institutions.
