KATHMANDU, JUNE 21

Amid widespread criticism, the government has decided to return the controversial bill to amend Banks and Financial Institutions Act (Bafia) from the Legislature-Parliament to the Parliamentary Finance Committee.

Parliament on Tuesday approved Finance Minister Bishnu Poudel’s proposal to return the Bafia bill to the parliamentary committee so that some of the controversial sections of the bill are amended.  This is perhaps the first instance where the

bill submitted at Parliament for endorsement has been returned to the committee.

With the removal of key provision designed to ensure good corporate governance, the revised bill drew sharp criticism from the bankers and economists who said it had been amended in such a way that suits “bank promoters at the cost of depositors’ interest”.

Multiple sources said that Minister Poudel as well as lawmakers from the ruling party CPN-UML were under immense pressure from stakeholders, including officials of Nepal Rastra Bank (NRB), bankers and economists, to return the bill to the committee.

Yubraj Khatiwata, vice-chairman of the National Planning Commission and former central bank governor, and other NRB officials close to the UML played a crucial role in convincing the finance minister in returning the bill to the Parliamentary Finance Committee, an NRB source said.

Parlimentary Finance Committee Chairman Prakash Jwala said that he would soon consult with the fellow committee members and call a meeting to discuss the matter. “Now, we will carry out the discussion more seriously,” said Jwala. “We will make necessary amendment after consultations.”

The bill was tabled at Parliament by removing provisions that limit terms of bank chairmen and directors, restriction on individuals holding constitutional posts from becoming bank directors and distinguish between bankers and businessmen. The bill is also flexible on qualification of directors, provisions regarding suspicious transactions and punishment and penalties.

Besides, the involvement of lawmaker Ichha Raj Tamang, who is also the chairman of Civil Bank, in the process to amend the Bafia bill has also drawn strong opposition from the stakeholders who said there certainly was conflict of interest.

The bill ran into controversy after the parliamentary sub-committee, of which Tamang is a member, made changes to the bill to suit bank promoters at the cost of depositors’ interest.

Considering the practice of same directors, chairmen and chief executives holding on to their positions for a long period of time at most of the financial institutions that faced crisis in the past, the original Bafia bill had proposed a term-limit for directors and chairmen. But the bill was tabled in Parliament removing such term-limit.

The lawmakers have also tinkered with the provision banning persons holding constitutional posts from becoming a bank chairman and director. The revised provision bans only those holding constitutional positions in Public Service Commission and Office of Auditor General from becoming a bank director or chairman.

Interestingly, the revised

provision does not bar lawmakers from becoming a bank chairman

and director. “In such case, the

NRB as a regulator will face

difficulty in taking action against more powerful lawmakers,” said Sanjib Subba, CEO of the National Banking Institute.