Stakeholders have expressed differing opinions on the provision to separate "bankers" and "businesspersons" in the proposed amendment to the Bank and Financial Institutions Act (BAFIA).
The revised bill prohibits banks and financial institutions from providing loans or facilities to individuals associated with them or those holding significant ownership in any bank. While the current threshold for "significant ownership" is defined as a 2% shareholding, the bill proposes to reduce this to 1%.
Bankers have criticised the provision that bars individuals from obtaining loans from other banks merely because they have invested in one bank, saying it is impractical.
On Wednesday, during a discussion held by the Federal Parliament on the BAFIA First Amendment Bill, 2080 BS (2023 AD), representatives from the Confederation of Banks and Financial Institutions, Nepal Bankers’ Association, Development Bankers’ Association, and Nepal Financial Institutions Association voiced concerns that such provisions could discourage investment in banks.
Confederation Chairperson Upendra Paudel stated that restricting a person who has invested in one bank from borrowing from another is unjustified. He further argued that there should not be an age limit set for Chief Executive Officers (CEOs) and board directors, suggesting that qualifications and experience should be the key criteria.
Newly appointed Governor Dr Bisho Nnath Poudel spent his first day in office on Wednesday engaged in various discussions and meetings. In the morning, he took the oath of office and secrecy before Chief Justice Prakashman Singh Raut at the Supreme Court. He then met Finance Minister Bishnu Paudel at the Ministry of Finance.
Following this, he assumed office at Nepal Rastra Bank and later held a meeting with a delegation from the Federation of Nepalese Chambers of Commerce and Industry (FNCCI). During the meeting, FNCCI President Chandra Dhakal suggested that both monetary and non-monetary measures be adopted to boost the morale of the private sector, especially given that credit expansion has not picked up despite lower interest rates.
Governor Paudel stated that Nepal Rastra Bank’s monetary and other policies would be framed based on policy stability and dialogue with stakeholders.
Stakeholder echoed concerns, stating that if the bill is passed in its current form, it could create complications.
Former Finance Secretary Rameshwor Khanal has stressed the need to distinguish clearly between bankers and businesspersons. He supported aligning the Act with international standards, noting that in countries like the United States, even the world’s wealthiest individuals—such as Elon Musk—do not own banks. He emphasised that Nepal must adopt a similar approach.
During the discussion, former Governor Dr Chiranjibi Nepal warned that if the BAFIA amendment bill is passed as is, excess liquidity may accumulate in banks and financial institutions. He underscored the need to clarify the purpose and intent behind bank investments.
