KATHMANDU, June 12: The Development Committee of the parliament has instructed the government to take needful initiative in prodding commercial banks to open their branch office in each local unit.
Concluding that the presence of at least one commercial bank in each local unit was necessary for making local government effective and facilitate economic activities, the parliamentary committee has instructed the government, Ministry of Finance and Nepal Rastra Bank to take lead toward that end.
The house panel has directed the government and the central bank to ensure that at least commercial bank reaches each local unit within two months.
Banks to enjoy business monopoly in local units for 3 years
As the local governments are getting new leadership through elections for the first time after the country embraced federal structure, preparations are also underway to prod commercial banks to set up their branch offices to facilitate transactions at local units. Earlier last week, the NRB has held an interaction with Nepal Bankers Association (NBA) -- the umbrella body of chief executives of ‘A’ class banks -- to discuss about its intention to send banks in each local unit.
Following the meeting, the central bank has decided to allow commercial banks to open their branch offices in each rural municipality under ‘first-come, first-served’ basis, and restrict another bank to go to the same place for three years.
The decision was in line with the demand of the bankers to restrict presence of another commercial bank if there is already one in the same rural municipality.
Also in the budget speech for the upcoming fiscal year -- 2017/18, the then finance minister Krishna Bahadur Mahara had announced that the government would make needful arrangements to open a branch office of commercial bank in each local unit.
According to a conservative estimate, three-government owned banks including other private banks have their branch office in nearly 350 out of 744 local units. The branch office at the local unit will not only get business from the private sector, but also handle the government transactions.
The central bank has also made commitment to make necessary arrangement for providing all government transactions at the rural municipality to the branch office of the commercial bank reaching there.
A rural municipality will mobilize of up to Rs 390 million in equalization grant for Fiscal Year 2017/18 which will flow through the banking system.
