- KSHITIZ SHARMA Tiwari
Corporation face the problem of financial distress when their cash flow are not enough to meet their obligations. The last few decades saw mushroom growth of bank and financial institutions in Nepal and the bank has become an important features which renders service to the people in the financial matters and its magnitude of action is extending day by day after the financial liberalization in Nepal
However, the most recent collapse of a cluster of financial institution defined the self -belief and created commotion among the general people regarding depositing their hardly earned money in bank .The public have conventional faith in bank and financial Institutions ,but most of the banks are mobilizing the funds at their whim haphazardly .This suspicion among the people has led to the loss of credibility of financial institutions.
The following are some of the preventive measures of it
1) Central Bank should strength its system of supervision and Monitoring by making improvement in its record keeping system ,Information ,Communication, Equipment technology and frequent on site supervision of central banks staffs.
2) Compliance of Bank and Financial Institutions: The Board of directors (BOD) OF Banks and financial Institutions should be capable to run the Instutions in a proper way as they play pivot role in success of financial market and instruments issued by them. Similary ,the top level management should be made more accountable to their Depositors and Shareholders
3) Reduce the cost of operation: Most of the Commercial banks do-not lend to small borrowers ,due to its higher cost of operation. They give more prone to commercial loans only and less priority to provide credit facilities for agricultural activities cottage and small scale industries
4) Focous On Fair Competation: For proper utilization of banks and financial institutions resources,there should be system of fair competation because of the following reasons
- Number of players in the system is increasing rapidely but the size of cake remains the same.
- Most of the big business houses in Nepal are involved in the banking business ,Despite the pre-requisite of good Governmance.
- The domestic financial system has to compete with the international banks after 2010,so they must improve themselves in terms of technology, productivity, efficiency, capital and experience.
5) Overall management of Bank and financial institutions:
In my view it is possible by making code of conduct to the bank CEO,S for increasing their accountability towards what they do.
6) Role of legislation:-due to lengthy procedure of mergers and liquidations, it has created badly impact on financial transactions of secondary market.in my view more power should be given to central bank to handle the insolvency cases. Similary ,the change in Bank and financial act, Monetary and fiscal policy has impact on financial health of bank and financial institutions.
7) Priority to rural areas:-Most of the bank central office are in capital. Although their branches are located outside of Kathmandu valley and also in Urban and Semi-Urban areas. The branches of NBL,RBB and ADB/N which were previously located in Rural areas, have been either closed or Merged with their branches due to security related problems during the decade of the new millennium .The bank and financial institutions should now focous on Development and Innovation of new product to attract the potential customers and decrease their dependency in informal financial institutions such as money lendes,relatives and friends,as many people living in rural areas donot have proper acess to formal financial institutions.
Thus the Bank and Financial Institutions of Nepal, providing loans either on basis of collaterals or Group gurantee,but there is still no practice of providing minimum loans to clients on basis of Cash flow of project or Stock of the business ,if it comes into practice it definitely helps to give birth to more young Entrepreneurs and Enterprises, that creates more employment opportunies within the nation. Similary ,If the resources are properly utilized, export of the nation increases ,resulting increase in GDP ,But decreasing in trade deficit of the nation, Thus it leads to economic growth of the Nation. In order to make CEO and other employee more accountable, Corporate Culture should be implemented fully in the Organizations.
In order to reduce the cost of operation , in my view, paperless banking system is one of the best alternative ,similary use of electronic cards in shopping has been practice in Nepal by Bhatbhateni supermarket ,providing 4% discount on the purchase bill of customers due to reducing operation cost of concerned bank and shopping centres,its is possible due to less use of human resources . likewise, Kiosk Deposit ,which is practice by Everest Bank is also also next alternative way to reduce cost of operations of bank and financial institutions. The recent decision of providing mimimum 2%on the Principal to those people not getting IPO shares from(primary market),decreasing mergers period from 3 month to 1.5 months , reducing commission rate of brokers ,and increase of paid of capital by previous year monetory policy definitely will give green signal to the capital market of Nepal in the future.
References
1. 1)Regmi Yogendra,Modern Banking System of Nepal,Eagle Eye Research Pvt Ltd,2063 BS
2. Madura.J(2012),Financial Institutions And Markets,Delhi:Cengage Learning India Pvt Ltd
3. Nepal Government,Ministry of Finance(2016),Economic Survey Report,Kathmandu.
4. Nepal Rastra Bank(2014),Financial Stability Report,Kathmandu.
5. Nepal Rastra Bank (2016),Quartely Economic Bullein ,Kathmandu.
6. Security Exchange Board Of Nepal(SEBON),www.sebon.gov.np
