Ministry of Labour and Employment and Nepal Rastra Bank (NRB) have taken differing positions on plans to establish a labour bank.

In the budget for fiscal year 2014-15, the government has announced exploring the possibility of establishing such a bank through joint investment from employers, employees, and the government.

On Monday, Labour Minister Deepak Bohora insisted the proposed bank must be established, but NRB Governor Chiranjeevi Nepal suggested formation Labour Investment Fund instead.

Bohora said labour bank was needed to ensure cheaper loans to prospective migrant workers, adding the workers would also send remittance back home through the bank. “There can be discussion on the nature of the bank, but let’s establish it,” said Bohora, at a discussion organised by the Parliamentary International Relations and Labour Committee.

In line with the budgetary provision, a team led by Nepal (before his appointment to NRB) had studied the need for a labour bank, and had even recommended establishing such an institution. But on Monday, Nepal said given the central bank promoting consolidation of banks and financial institutions while imposing moratorium on bank licence issuance, opening a new bank was not a good idea.

“The government has adopted a policy of divesting its shares from banks where it has majority stake,” said the governor. “As the government has received aid from international institutions such as the World Bank and International Monetary Fund to bring reforms in government-owned banks and pledged to reduce its stakes in them, establishing another government-owned bank does not give good message to the international community.”

The government has asked Agriculture Development Bank to explore bringing in a strategic partner to reduce the government’s stake. It has also announced plans to merge NIDC Development Bank and Hydroelectric Investment and Development Company to enable the merged entity to invest in major infrastructure projects. The governor said

establishing an institution, like the Citizen Investment Trust, to address the issues of workers would be easier and such institutions could be established quicker.

Finance Ministry Joint Secretary Surya Prasad Acharya said the government’s Financial Sector Development Strategy has adopted a policy of reducing its stakes in BFIs. “The government wants to have just one bank under it,” Acharya said. “The Finance Ministry has not given its nod to plans to establishment a new bank due to the aforementioned policy,” he said.

However, Labour Ministry Secretary Ram Kumar Acharya said the ministry was ok with any type of institution that addresses the issues raised by the labour minister.