Country needs financialising national saving: Dr. Khatiwada

Kathmandu, Apr. 28:

Finance Minister Dr. Yuba Raj Khatiwada said on Sunday that the country needed financialising the national savings to support development and economic growth.

“The gross domestic saving this year will be 20 per cent of the Gross Domestic Product (GDP) which is up by 4 per cent against last year’s 16 per cent. We must work to financialise and mobilise those savings so that the economy is benefitted,” he said.

He was speaking at a seminar on ‘Merger: Agonies or Ecstasies’ organised by IBN Media and Research in Lalitpur on Sunday. 

Dr. Khatiwada suggested the banks and the National Rastra Bank (NRB) to identify methods to use the domestic savings.

“If we fail to financialise the domestic savings when we move to the digital economy, it will impact the economic growth,” he said.

He said that the country had more banks and financial institutions (BFIs) than it actually needed, and recommended to reduce their number and create a few stronger institutions.

Bhuwan Dahal, Chief Executive Officer (CEO) of Sanima Bank, said that the merger and acquisition had reduced the number of BFIs (commercial and development banks and finance companies) to 86 in 2018 from 189 in 2012.

At the same time, it has helped reduce the non-performing loan (NPL) to 1.6 per cent from 3.6 per cent six years ago.

However, liquidity situation has been worse over the years though Dahal said that it was not the result of merger and acquisition.

"Return of shareholders' fund has also gone down. It was 24.42 per cent in 2012 and came down to 17.19 per cent in 2018 but it was not due to the merger but because of the increased paid up policy of the BFIs," he said.

According to him, agonies are caused by the board of directors, senior management and other staff position, pay adjustment issues, inferiority complex among the staff of smaller institutions or the ones that were acquired by stronger institutions.

"Transitional journey is full of agonies but it can be minimised with unbiased management. Those BFIs that did not opt for merger and acquisition are also feeling agonies as they are feeling pressure on return," he said.

Commenting on the presentation of Dahal, Executive Director of the NRB Narayan Prasad Poudel said that the merger and acquisition of the central bank was successful in decreasing the number of development banks and finance companies but less impactful in terms of class 'A' commercial banks.
The number of microfinance banks will reach 116 in near future but the NRB intends to reduce their number by 50 per cent.

CEO of Nabil Bank Anil Keshari Shah asked to develop proper reasoning before creating mega banks.

“If we are creating mega banks, we must be clear about the future course and destination of the development and the institution,” he said.

Coordination of Banking Committee at the Confederation of Nepalese Industries Anal Raj Bhattarai recommended incentivising the consolidation of banks. “If such thing happens, the management will not oppose merger and acquisition,” he said.

President of Nepal Bankers Association Gyanendra Dhungana said that the central bank should implement universal banking license.

He also suggested increasing the member of the board of directors in order to promote the merger and acquisition.

Published in The Rising Nepal daily on 28 April 2019.