-  Thursday 01 October 2020

Banks should lower spread rate: Governor

Governor of Nepal Rastra Bank, Bijaya Nath Bhattarai on Saturday expressed strong dismay over the spread rate maintained by the financial institutions, terming it 'unacceptably high.' 
"The average spread rate - the difference between deposit and lending rates -  at the banks is around six percent in Nepal, while it is around three to four percent in the developed countries," he said.

Speaking at the Reporters' Club, he said the higher spread rate reflects that Nepali financial sector is not quite efficient and lots of reforms are needed.

Stressing the need of mergers in financial institutions, he said the central bank is planning to introduce necessary laws to facilitate these.

"Rather than introducing a separate Act to encourage merger and acquisition of financial institutions, we are planning to unveil new laws under the existing Banking and Financial Institutions Ordinance," he said.

He said that the banks should be strengthened and made efficient, if they are to sustain when the country opens up banking sector to foreign investors in 2010 as per its commitment to the WTO. "The best way to challenge the competition for banks is to promote mergers and by consolidating their financial status," he said.

Commenting on the challenges of banks, he said there is a pressing need to reduce non-performing assets. "Rastriya Banijya Bank and Nepal Bank Ltd had NPAs of around 50 percent. The average NPA of the banking sector was around 18 percent by last-mid July," he said.

He also asked the government and the judiciary to extend support to the central bank's continued effort to reform the financial sector.

On healthy growth of the banks, Radhesh Pant, president of Nepal Bankers Association said it is transparency and professionalism, which have enabled banks to achieve higher growth in profit.

"Remittance is playing a crucial role in boosting banking sector," he said. "Central bank has stepped up measures in recent times to take action against defaulters. This has also helped the banks to thrive."

He said as part of their plan to diversify investments, the banks are now focusing on retail banking. "Of the total loans disbursement of the banks, the retail banking sector makes up around 25 percent," he said.

Himalaya Shumsher Rana, former governor of Nepal Rastra Bank said banks' profit levels are on the declining trend, signaling that the golden age of banks is now over.

Uttam Pun, executive chairman of Nepal Development Bank said newly established banks are not recording as much profits as the older ones are getting. "This shows that banks have begun to feel the impact of conflict," he said.

The Kathmandu Post

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