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Chiranjivi Nepal, who took the lead of the government of Nepal Rastra Bank in 2015
For a poor country with a tiny economy, but it is measured, Nepal certainly has a lot According some estimates, there would be up to 250 financial institutions of any type, including remittance houses, licensed by the Rastra Central Bank of Nepal, Kathmandu.
In one of the poorest countries in Asia, over the last 15 years, prime ministers and six central bank governors have struggled to obtain adequate capacity in their official institutions, which means that the already well-developed central bank has 250 separate entities.
This year, Nepal Rastra Bank had authorized 28 so-called Cla ss a commercial bank to operate in the country.
Even that might seem more than enough for an economy that generated only $ 24 billion in gross domestic product last year. Zambia and Papua New Guinea, economies of similar size, are managing with only 19 and four licensed commercial banks. And middle-income Malaysia, with an economy almost ten times larger than Nepal's, has more realistic licensed commercial banks.
Many top Nepalese bankers admit that the country is overbanked
"There are too many banks here, unfortunately," said Anil Keshary Shah, chief executive officer of Nabil Bank. "The bank Rastra estimated:" No, the more we are crazy, because it will strengthen the competition. "
At Himalayan Bank, one of the largest private commercial banks in Nepal, in which HBL of Pakistan is a 20% shareholder, Ashoke Shumsher Rana general manager agrees.
" There are too many financial institutions, "he says." Even at the top 28 banks, there are too many. "According to Rana, 10 to 15 major banks would be ample for this market.
Yet This is not even half.The central bank has authorized 36 class B development banks to serve 30 million Nepalis – 60% of which are designated as unbanked – and 25 category C financing companies. In addition, there are 63 microfinance banks, and if it was not enough financial institutions, the central bank lists 14 other credit unions, 25 authorized non-governmental organizations and 10 companies that defy the bureaucratic description and which are grouped in a basket of other institutions, most of which appear to be hire-purchase providers.
This still does not include the 49 companies authorized by the central bank to operate in the remittance sector of about $ 7 billion a year in Nepal, the largest contributor to its GDP.
Consolidation
You would be forgiven for thinking that a thorough consolidation of the Nepalese banking and financial sector by the central bank has to be expected for a long time. After all, the World Bank and the IMF have repeatedly advised Nepal to reduce the number of banks and strengthen its financial licensing regime.
It's already happened, announced Nepal's Chiranjivi, who took over Nepal Rastra Bank in 2015.
"Many banks have merged," he told Asiamoney. "When I arrived here, there were nearly 300 banks and financial institutions."
According to his calculations, 158 banks and financial institutions were absorbed by other banks in the last three years. to eliminate the weak.
"I asked them to increase their paid-up capital in two years," he says, with obvious satisfaction, adding that there are 150 banks and financial institutions registered with his central bank, less than 201 than the own official bank
But is there no need for additional consolidation, or perhaps another capital increase to eliminate even more of ransom?
"No, this is not the moment". "It's very hard, you need the support of the government."
And with so many unbanked Nepalese, "we need banks in every corner of the country," he says. "You do not know the depth of the economy.It is a growing economy, our GDP is underestimated … it exceeds $ 30 billion."
We are concerned that s & # 39; There is a problem in a financial institution, people say, "Oh my god, I want to get my money out." Anil Keshary Shah, Nabil Bank
One of the reasons for the proliferation of financial houses in Nepal At the end of 2007, after a long civil war, Nepal abolished its monarchy to become a federal republic.The Communists, both Maoists and Marxist-Leninists in ideological orientation, led seven of the ten governments since then, including the current administration of Prime Minister Khadga Prasad Oli.They have divided the country into 753 local municipalities unmanageable, the new federal bureaucracy requiring a banking presence of some description in each of them. they, ostensibleme to help development.
"A bank must be opened (present) in 753 units, in every corner of the country," says Governor Nepal
. The result is a mantra often heard among Kathmandu bankers who complain of being forced to open and run unprofitable branches in remote locations.
to do it for the nation, "insists Governor Nepal. "As part of their social and corporate responsibility, they have to go (so) people can become more aware of the financial sector.It's an opportunity for them.I tell them you have to leave otherwise we will send you there. It is their national duty, of course. "
Asked about his independence, the governor laughs and points out that he currently serves in a government that had five prime ministers during his three years at the central bank. He says he has good relations with the Minister of Finance, "but that does not mean that I do everything he says."
Remittances
Nepal is one of the economies most dependent on remittances. Households receive nearly $ 7 billion a year from the Nepalese diaspora, working for example in the Gulf and Southeast Asia; This represents about a quarter of GDP
. Remittances are not only essential for keeping the economy afloat, but also for allowing the central bank to build up reserves. Governor Nepal says the bank has reserves of nearly $ 10 billion, which would cover imports for about 10 or 11 months, and $ 2 billion more than when he joined
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