Kathmandu, August 8: Nepal Bankers’ Association (NBA) — the umbrella organization representing 28 commercial banks of the country — has expressed its reservations over the central bank’s recently released circular claiming that some of its provisions may jeopardize not only the banking sector but also the overall economy of the country.
It is particularly irked with the provision of the revision of the method to calculate the interest rates spread, increment in the countercyclical buffer requirement, and a ban on the bancassurance.
“The implementation of the new spread calculation method will directly squeeze the banks’ profits by almost Rs 30 billion, or 25 percent of the total profits in the banking sector,” the Association states adding, “It will also bring down the share value of commercial banks that has a 75 percent stake in Nepal’s share market.”
The new rule on the spread calculation bars the banks from including their interest-earning from investments in government securities while calculating the spread rate as allowed earlier.
The NBA also says that the decision to raise the countercyclical buffer by 2 percent will create negative impacts on the lending capacity of banks.
With such increase, banks will now be required to maintain 13 percent of capital adequacy ratio from existing 11 percent. This, according to the NBA, will squeeze the lending capacity of banks by Rs 150 billion.
Claiming that the above-mentioned policies adopted by the central bank will mar the government’s economic growth target of 8.5 percent in the ongoing fiscal year and the credit growth target of 21 percent, the bankers demanded their annulment at the soonest.
