Banks asked to invest in young risk takers

Kathmandu, July 2

Finance Minister Dr. Yuba Raj Khatiwada said on Tuesday that poor knowledge and unwise behaviour on the part of the financial consumers had invited interventions from the regulator.

“The 2008 economic slowdown had the wrong notion that the market runs on its own. Similarly, the principle that the consumers behave wisely in the market has also failed,” he said while addressing a conference on ‘Financial consumer protection and education in Asia-Pacific’.

According to Dr. Khatiwada, the consumers had a tendency to collect benefit in riskless situation and blame the government when there was a risk. “When a bank becomes sick we organise sit-in protests in front of the central bank, but keep the benefits in our pockets. This is the level of financial literacy,” he said.

He said that the financial sector in the country should not delay to adopt the disruptive information technology innovations. Many bankers and the regulators, including me who had worked at the Nepal Rastra Bank (NRB) for 25 years, are apprehensive about using the latest IT innovations and do not know the cloud system well, he said.

“There is no alternative to  the cloud based services so you need to tell the people about its benefits but must be aware that the IT based banking has created many challenges in the parts of the service providers as well,” he said.

Stating that the financial literacy was perhaps a one-time activity, the Finance Minister directed the banks and Financial Institutions (BFIs) and other financial market stakeholders to invest in the young people as they are the risk takers. With the growing age, people become risk averters so you need to devise products and plans according to these two different market segments, he said.

Dr. Khatiwada stated that there was a challenge to utilise the money send to the country in the form of remittance as the major part of it goes to the hands of family members who are financially illiterate. “They need information about the best bank to save their money, insurance company to buy insurance plan and profitable company to buy shares,” he said.

Deputy Governor of the NRB Chintamani Siwakoti said that the ability to know the importance of money and ensuring its proper utilisation would help uplift the living standards of people.

“Being financially literate means that the consumers will be able to make wise choices to use financial products, make sound financial decisions, and optimise resources by better financial planning,” he said.

According to Siwakoti, the NRB is in the process of developing financial literacy framework which is planned to be implemented in licensed institutiosn after successful implementation at the central bank.

“The central bank has directed licensed entities to practice simplified and transparent banking practices, organise financial literacy programmes mandatorily, ensure privacy of client data, ensure ample measures for client protection and arrange for grievance handling,” he said.

Chairman of the Security Board of Nepal (SEBON) Dr. Rewat Bahadur Karki said that financial education and consumer protection were the tools to build sustainable, credible, resilient and inclusive financial sector.

“In order to have institutional mechanism for increasing financial education, investors’ awareness as well as professionalising the market participants, we have made final preparation to establish Securiteis and Futures Market Institute,” he said.

He said that the institute will be established within a month as an education training wing of SEBON.

In a televised address to the conference, Deputy Director of the Directorate for Financial and Enterprise Affairs at the Organisation for Economic Cooperation and Development (OECD) Antonio Gomes expressed hope that the forward looking conference would find effective ways for enhancing financial literacy.

The two-day event is being organised by the SEBON in collaboration with the OECD.

Published in The Rising Nepal daily on 6 July 2019.