"Impact Assessment of Foreign Banks in
Nepal
To Capital Flight"
In the Nepalese banking sector, we have at present 29 commercial
banks in which 1 bank is a MNC and 7 banks are of JV – natured. Nepal, along
with the entrance in the global arena through liberalization during 1980’s and
adoption of one window policy thereafter, experienced several development
springs being promoted, aided and operated by and through the foreign
development partners. One such development sector among the springs is the
financial. More identically, the banking sector where JV’s at those times
airlifted the banking revolution through capital injection into the Nepalese
Economy.
We know, the primary function of bank is to accept deposits and
circulate the same in forms of investments, loans and advances. Technically,
the end result of the same phenomenon reflects at the end of FY through which
profits, dividends, bonuses, taxes, etc. are announced and when most
of such announced returns goes in the basket of development partners. It
has been almost and around 30 years, today’s renowned and top banks of Nepal
established in the form of JV and MNCs extended branch here in Nepal have
awesomely benefited the basket of their promoters more than the
capital injected.
It is also not deniable that such banks brought advanced management practices, smart ideas, better governance, modern banking trends and technologies along with them but after all it was only the business they were doing since around 30 years of the liberalized economy. The financial literacy would have been improved subsequently but business on major cities and hubs were beneficial to earn and transfer returns into the basket. In contrast, why would privately promoted and state-owned banks like Janata Bank Ltd., Prabhu Bank Ltd., Global IME Bank Ltd., Rastriya Banijya Bank Ltd., and Nepal Bank Ltd., enter rural sector both to develop financial habit and conduct their respective businesses, knowing the fact that the operation cost is higher than the income earned.
Similarly, deposits collected from hardships and toils of Nepalese
depositors are placed/ invested in the foreign banks like HDFC and MASREQ, and
others to obtain rates of returns against placements and disclose a well –
managed balance sheet instead banks could also have well selected productive
sector lending and earned from such businesses and projects (Note that:
PSL has been nationally prioritized). Today few Nepalese promoted privately
owned banks have higher NPA ratio as compared to that of JVs and MNC banks
because of being a risk neutral in the periphery of Nepalese economy.
In a very recent instance, in case of SCBN, the company has been
bold enough not to confront with the latest monetary policy (Monetary Policy:
FY 2015/16) for increasing their paid up capital up to 8 Billion Nepalese
Rupees. Proposed cash dividends with respect to other such returns were
announced amidst the Central Bank’s circular. Similarly, NIBL decided and also
issued FPO (Further Public Offering) at premium only value adding close to
around 1 Billion on its paid up capital after completion of subscription. SBI
also declared issuing right share at premium. Such similar instances, have
posed ethical threat to the Nepalese policy. This thereby would circulate the
Nepalese monetary system and currencies towards outer market beyond domestic
territory meaning to the slowing poison to the economy. In fact, we need to
understand that the commission/ margin of Nepalese economy’s money circulation
are in flight, - intellectually, technically and with the monetary point of
view. The effective control and U – turn diversion of such flights can be
addressed only by strengthening policy guidelines, regulations, active, strong
and vigilant role of supervisors, management for the security of profit returns
guarantee from project investments, unbiased political system, sense of
national interest and investment friendly environment with binding laws.
In conclusion, there is pretty strong positive correlation between
the foreign JVs and MNC bank and capital flights with regards to contribution
effect of such in so.
Thank You!
Jeevan Dahal (Jeev Dsk)
Chandragadi 01, Jhapa, Nepal
984191057
#ECONOMIC VENOM
