Banks uninterested in going to 109 local bodies

February 14, 2018 09:25 AM Republica


KATHMANDU, Feb 14: Commercial banks have not been able to show their presence in 401 local bodies across the country.

Data provided by the Nepal Rastra Bank (NRB) shows that commercial banks have opened their branch offices in only 352 local bodies as of mid-January out of the total 753 local bodies formed in the new federal structure. 

According to the central bank, commercial banks have made commitment to open branch offices to 292 additional local bodies. None of the commercial banks has expressed interest to go to the remaining 109 local bodies yet. 

Though the central bank has been making efforts to encourage commercial banks to expand their presence in all local units of the country, nearly one-third of the local units are going to remain unbanked.  The NRB has announced a new provision in the mid-term review report of the monetary policy for FY 2017/18, requiring a bank to open its branch in two local units where none of the banks have reached so far to open a branch office in Kathmandu and Lalitpur metropolitan cities.
In its mid-term review report released on Tuesday, the central bank also said that commercial banks that have made commitment to open their branches in local units must do so within the current fiscal year. 

As an incentive for opening branch office in the unbanked local units, the NRB has been providing interest-free loan of Rs 10 million to each branch opened in local body. 

Commercial banks opening the first branch office in any local body can enjoy monopoly for three years as the central bank has decided to not allow another commercial bank to go there during the period. The branch office at the local unit will not only get business from the private sector, but also handle the government transactions.

Through the budget speech of the current fiscal year, the government has said that the necessary arrangement will be made  to  open  at  least  one  branch  of  the  commercial  banks  in each rural  municipalities and  municipalities.  The government also plans to maintain the local consolidated fund in the commercial banks and obtain electronic data of such fund in the Financial Comptroller's Office.

Bankers, however, attribute their reluctance to go to rural municipalities to the lack of basic infrastructure needed for a bank for its operation. “The government and the NRB have been saying 'go to rural units', but they don't care about building infrastructure like road, electricity and Internet there. Even security is a key requirement for a bank to open its branch,” said a bank's CEO, asking not to be named.  


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