Concerns need to be addressed to pass Bafia: FinMinThe bill to amend the Banks and Financial Institutions Act (Bafia) cannot be passed without first addressing the concerns that have been raised over it, Finance Minister Bishnu Poudel said on Monday.
The bill to amend the Banks and Financial Institutions Act (Bafia) cannot be passed without first addressing the concerns that have been raised over it, Finance Minister Bishnu Poudel said on Monday.
The bill engulfed in controversy after the parliamentary Finance Committee removed many provisions that had been inserted in it to ensure corporate governance under pressure from bank promoters who wanted to protect their interests.
Following the removal of key provisions designed to ensure good corporate governance, the revised bill drew severe criticism from bankers and economists who said it had been gutted in such a way that it suited ‘bank promoters at the cost of depositors’.
“The provisions that limit the terms of bank directors and chairmen, restrictions on individuals holding constitutional posts from becoming bank directors and distinctions between bankers and businessmen are missing in the bill,” Poudel told the House Finance Committee. “This is not what the market wants and it is unacceptable.”
Similarly, the provision about converting promoter shares to ordinary shares after seven years of the establishment of banks and financial institutions (BFIs) is not appropriate, he added. “According to my understanding, such a provision should not be inserted in the bill,” he said.
A full house of Parliament returned the bill to the Finance Committee asking it to reconsider it at the request of Finance Minister Poudel. Fresh discussions on the bill were initiated at the Finance Committee on Monday.
Poudel also requested committee members to include a provision barring persons holding constitutional posts from becoming bank directors or chairmen.
This provision had been removed from the bill. The revised provision bans only those holding constitutional positions in institutions like the Public Service Commission and the Office of the Auditor General from becoming bank directors or chairmen.
The bill had also loosened the qualification requirement for directors which made it conflict with Nepal Rastra Bank (NRB) regulations.
“According to NRB regulations, potential directors need to possess five years’ experience. The bill had slashed the requirement to one year,” said Poudel. “In this case, the Bafia bill has sidelined the regulator.”
During the meeting, NRB Governor Chiranjeevi Nepal said Parliament had returned the bill to the Finance Committee to make it more responsible.
Stating that 11 financial institutions were still in trouble due to misuse of power by their promoters, Nepal urged the lawmakers to create a legal foundation so that other financial institutions would not be similarly distressed.
The decision to return the bill to the Finance Committee had been made by the government, so we asked the Finance Minister to provide an explanation, said Finance Committee Chairman Prakash Jwala.
“Other committee members will put forth their views on the bill and we will carry out discussions more seriously at the next meeting,” said Jwala. “We will make the necessary amendments after discussions are held.”
Although we are yet to decide when to hold the next meeting, we will hold consultations with the panel members and call it, he added.