KATHMANDU, May 23: Banks and financial institutions (BFIs) that are facing difficulty in adhering to capital adequacy provision of Nepal Rastra Bank (NRB) can now voluntarily choose to narrow down their working area.
The central bank issued a fresh policy to this connection on Monday, going by which BFIs of national level can now seek to function as a regional level institution or even go down to function as district level institution working in 10 to 1 districts.
Officials said the new policy was introduced, keeping into consideration the problems faced by the financial sector players, particularly in complying with capital adequacy provision of the central bank.
“In the past, we saw financial institutions competing intensely to jump up the category and widen their working areas. The scenario is no longer the same. Hence, we decided to open the reverse movement as well,” said Bhaskar Mani Gyawali, spokesperson of NRB.
Apart from voluntary reduction of working areas, it also has provisions as per which the central bank can force the BFIs to narrow down their working areas.
The forceful measure will come into effect only if BFIs failed to comply with capital adequacy ratio, or is in loss for five consecutive years, or faced actions repeatedly for not complying with the NRB directives, or if they have nor maintained risk management fund.