Kathmandu: Dr. Tilak Rawal, the Governor of the State owned Nepal Rastra Bank or otherwise the NRB, has said that his financial institution “feels that the prevalence of a strong corporate governance is necessary for the development of a vibrant and resilient financial market and is an effective tool to protect the interest(s) not only of the investors but those of the depositors as well.
Dr. Rawal made these remarks last week at a talk program organized by the Society for International Development, Nepal Chapter, at Hotel Malla.
Dwelling on the theme of “Corporate Governance and Financial Sector reforms in Nepal”, Dr. Rawal, the Governor of the apex financial institution in the country opined that Nepal should take lessons from the 1997 ASEAN financial crisis and go deep into the factors that caused the almost collapse of the world renowned Companies like ENRON and Worldcom which definitely should have forced the financial leaders of the globe to turn their eyes towards the issue of Corporate Governance.
“Highly unsatisfactory performance of the two banks, Rastriya Banijya Bank and Nepal Bank Limited and reports of rampant irregularities at a number of other financial institutions have prompted NRB to initiate appropriate actions encouraging transparency and accountability”, added the NRB Governor.
He however, did not mention that he too should be blamed for the inaction and irregularities in the two banks he mentioned though he himself occupied the Chair of one of the commercial banks for several years and invited criticisms, both healthy and unhealthy, from various sectors of the national life.
Easier said than done.
According to him, corporate governance encompasses the relationship and pattern of all those involved in an organization and that the ASEAN crisis has amply shown that good corporate governance is essential for sustainable growth of financial sector.
Highlighting the measures he is taking to correct the economic aberrations in the country, Dr. Rawal said that the NRB had of late been “withdrawing public sector involvement from the financial sector, developing sound legal frameworks, strengthening the central bank, strengthening accounting and auditing practices and finally enhancing competition among the actors of financial sector are some of the measures initiated to develop a vibrant and resilient financial system in Nepal”.
Welcoming the attending participants, Professor. Dr. Bishwa Keshar Maskay, the President of the SID, Nepal Chapter, said that though the country opted to go in for a vigorous reform process to revitalize the dwindling Nepali economy as back as in 1990, however, “in spite of the seriousness of the purpose, the reform process thus initiated has neither been sustained along a steady momentum nor has its effects as yet been clearly and widely felt because of the political instability created by successive fragile and transient governments and other domestic uncertainties”.
In his opinion, the stress on the reform process has been mainly on account of piecemeal approach adapted in subsequent periods of time.
“The vital need is to sustain progress to complete the tasks at hand and that an efficient and robust financial sector is the foundation for delivering sustainable economic growth. To accomplish those goals, Dr. Maskay prescribes “better financial intermediation” which according to Dr. Maskay “enhances the efficiency of the allocation of resources by eliminating distortions in the cost of capital and facilitating efficient payment mechanisms amongst various actors within the economy.