Rising imports creating pressures on reserves

 Kathmandu, Nov. 27

Deputy Governor of the Nepal Rastra Bank (NRB), Nilam Dhungana, said while economic recovery seems promising for Nepal, rising imports and stagnant remittances have created pressure on current account and foreign reserves.

At a time when the global economic recovery is picking up, new variants of coronavirus are creating uncertainty in the recovery path, she said while speaking at 'Conference on leadership development for the new normal' organised by the Banking Finance and Insurance Institute of Nepal (BFIN) in the Capital on Saturday.

However, COVID-19 pandemic inspired a rapid growth in digital financial services. "Increasing use of digital financial services has lowered transaction costs by maximizing the economies of scale, has made it possible to connect the population without access to financial services and has removed the barriers of providing financial services such as geographical distances, lack of identification and lack of formal income," said Dhungana.

According to her, during the last 16 months, average number of monthly transactions through digital instruments increased by 86 per cent and average transaction volume has gone up by 70 per cent while QR payments saw six-fold increase.  

Stating that the crisis could challenge even the most experienced leaders of the financial industry as it could evolve into most unexpected and complicated scenarios, Dhungana said that there was a need of the leadership that could take bold and decisive actions for remaining competitive and making the financial industry resilient to the crisis.

Former Governor of the NRB, Dr. Chiranjibi Nepal, said that the BFIs should work to create and maintain public trust on them.

"The COVID-19 has changed the way of conducting business and banking. After one-and-a-half year, we had the vaccines and recently, a new variant of the coronavirus has emerged in Africa which is resistant to the vaccines developed so far," he said while adding that the leadership should be more pro-active to adjust the business according to the demand of the rapidly changing environment.

According to Dr. Nepal, BFIs are facing four major situations in the new normal - low interest rates and elevated risk costs, challenge in finding new areas of business in the post-COVID scenario, need to meet the demand of digital solutions from the customers, and the threat society feels and faces during the pandemic.

"Digital transformation of banking and business is the demand of the new normal, so the leaders should define the guidelines for the promotion and implementations of digital banking," he said.

Dr. Nepal suggested the leadership in banking and financial sector to be more pragmatic, flexible, lead by example, and be a mentor.

Dr. Duvvuri Subbarao, Former Governor of the Reserve Bank of India, suggested the BFIs to look for the long-term benefits.

Former Governor of Bangladesh Bank, Dr. Atiur Rahman, said that every institution should have a culture of ownership in the part of the employees.

The one-day conference was attended by the board of directors, chief executive officers and top executives of banks and financial institutions, insurance companies, senior government officials, and leaders of public and private industries.  

Likewise, experts from India, Bangladesh, Nepal and Sri Lanka made their presentations at the conference.

Published in The Rising Nepal daily on 28 November 2021.