Bill bars NRB guv from joining BFIs after retiringIn an effort to avoid conflict of interest, a new amendment bill to the Nepal Rastra Bank (NRB) Act 2002 has prohibited the central bank governor from working in banks and financial institutions (BFIs) in any capacities after his/her retirement.
In an effort to avoid conflict of interest, a new amendment bill to the Nepal Rastra Bank (NRB) Act 2002 has prohibited the central bank governor from working in banks and financial institutions (BFIs) in any capacities after his/her retirement.
The bill, which is under discussion in the Parliament, has also barred deputy governors from working in BFIs in any capacity for seven years after their retirement or removal from the central bank. The ban is for five years in the case of executive directors.
The existing NRB Act has barred the governor and deputy governors from working in any BFI for one year from the date of their retirement. However, it Act has not barred executive directors from joining BFIs right after their retirement.
“It is basically preventing the central bank from moral hazard, preserving NRB governor’s protocol from being misused by the market and also for the protection of the system from potential conflict of interest,” said recently retired deputy governor Maha Prasad Adhikari.
Adhikari said the central bank proposed such measures so that top officials would not work in the interest of any bank or financial institutions where they would
join in the future. “Even from the perspective of morality and protocol, the governor joining any bank or financial institution creates moral hazard on the central bank,” he said.
A large number of former NRB governors, deputy governors, executive directors and other officials have been employed with different BFIs. Among the governors, the country’s first central bank governor Himalaya Shumsher JB Rana established Himalayan Bank, while other former governor Satyaendra Pyara Shrestha worked as Nabil Bank chairman.
Former deputy govenor Prafulla Kumar Kafle is the current chairman of Century Bank, while another former deputy governor Ram Babu Pant is chief executive officer of ICFC Finance Limited. Former Deputy Governor Krishna Bahadur Manandhar worked as chairman of Nabil Bank.
Similarly, former executive director Rajan Singh Bhandari is now the chief executive of Citizens Bank International, while Ratna Raj Bajracharya is the chief executive of Sunrise Bank.
Prithvi Bahadaur Pandey, Ganesh Kumar Shrestha and Surendra Man Pradhan, among others, also worked as CEO of different commercial banks until recently.
Meanwhile, the new bill has increased the duration of the refinance facility to one year with an option extension by another one year. The current Act has provisioned just six months of such a facility.
“As refinance facility has been a usual practice in recent years, with the central bank offering the facility to promote the productive sector, the maturity period has been increased to make operation of the system effective,” said Adhikari.