43 local units yet to see presence of commercial banks
KATHMANDU, May 18: A senior official at the Ministry of Finance has said that the government was ready to facilitate banking institutions to open their branch offices in all local units of the country.
Speaking at a discussion on ‘Banking in the New Federal Structure: Challenges and Way Forward’ organized in Kathmandu on Thursday, Uttar Kumar Khatri, a joint secretary at the finance ministry, urged commercial banks to open their branch offices in the unbanked local units to meet the government’s target of having bank branches in all local units. He also vowed to set up basic infrastructure needed for banks to open their branch offices.
The commitment of the finance ministry official comes in the wake of complaints from banking executives that the lack of basic infrastructure, including security posts, roads and connectivity, was making it difficult for them to reach out to local units of rural areas.
“Banks have only two months left to show their presence in local units which still do not have bank branches,” Khatri, who heads the Financial Sector Management Division at the finance ministry, said.
Through the budget announcement, the government has announced that it will make arrangement to have presence of commercial banks in all local units by the end of Fiscal Year 2017/18.
While commercial banks have submitted their plan to the central bank to reach out to all the local units by the end of the current fiscal year, there are doubts that they will be able to expand their branch offices to all 753 local units by the end of the current fiscal year i.e. mid-July. Banking executives cite the lack of basic infrastructures in many local units for their inability to open branches.
“We are aware of the problems that banks are facing. While some infrastructures like roads and connectivity are something that cannot be established immediately, we are ready to facilitate in whatever way we can for banks to go to the local units immediately,” he added. According to Khatri, the government is ready to open security post in areas where bank decides to open their branch office.
Out of 753 local units in the new federal structure of the country, 28 commercial banks have so far opened their branch offices in 510 local units, according to a data of Nepal Rastra Bank. Remaining 243 local units are still awaiting commercial banks.
Gyanendra Dhungana, president of Nepal Bankers Association (NBA), said finding human resources to establish and operate such a high number of bank branches at a time was a challenging task.
According to the NBA’s estimate, banks need over 2,000 staffers to set up and run bank branches in remaining local units. “It is difficult to find capable human resources at the local units while it would be expensive to depute people from the central level,” he added.
Also speaking at the program, NRB Governor Chiranjibi Nepal said that the central bank has been providing incentives to commercial banks to open their branch offices in unbanked local units. He also said that the expansion drive of the banks could also help them in meeting the regulatory requirement of priority sector lending as they will have more investment opportunities in the local units.