Kathmandu, March 24:Nepal Rastra Bank’s governor Dr. Tilak Rawal today said that the central bank would soon enforce ‘prudential regulations’ to enhance the banking system and to maintain macroeconomic stabilisation.

Failing to address the weaknesses in the banking system could pose a threat to overall economic stability, Rawal told the inaugural session of a one-day interaction programme on NRB Regulation and Supervision here this morning.

Rawal said that the challenges facing the banking sector demanded serious attention and deep concern adding that the central bank would come up with the appropriate measures to address these challenges.

NRB is currently in the process of working on strengthening its supervisory capabilities in assistance with consultant Fredrica P. Santos under the support of World Bank. It was in this context that the central bank’s Bank Operations Department organised the interaction. It aimed at bringing together the executives of the commercial banks and the central bank to exchange views on the forthcoming supervisory regulations.

Rawal said that NRB was preparing to enforce gradually the internationally accepted standards of loan classification and provisioning requirements, liquidity and reserve requirement, capital adequacy requirement, exposure limits, single borrower limit and code of ethics to build an effective and efficient banking system.

Maintaining that the reform of the non-banking sector was equally important, Rawal said that the central bank would take measures to address the structural and operational issues of these institutions in the days to come.

Rawal said that the introduction of financial sector reform in mid 1980s led to significant growth in financial sector resulting in 13 commercial banks, 46 finance companies, five rural development banks, five development banks and 35 co-operative institutions.

These institutions put together have mobilised deposits of Rs. 148 billion and extended credit of Rs. 96 billion.

Presenting a paper on internationally accepted banking standards during the business session, Santos said that it would be in the interest of the commercial banks to comply with the regulations issued by the central bank.