The recommendations aim to address pressing banking concerns by easing credit flow, restructuring interest rate mechanisms, advancing digital banking security, and enhancing overall financial stability.
- Credit Flow, Interest Rates, and Sectoral Investment
1. Reduction in Deprived Sector Lending Cap: The NBA recommends reducing the mandatory credit allocation for the poor/deprived class from 5% to 4% of total loans, citing shifting market dynamics and actual credit demand.
2. Inclusion of Health and Education in Priority Sectors: To meet the country’s evolving infrastructure needs, the central bank should formally include the health and education sectors within its designated priority lending framework.
3. Implementation of Risk-Based Pricing: Banks should be allowed to dynamically adjust loan premium rates based on a borrower’s shifting risk profile. Provisions should allow premium adjustments mid-loan according to mutual agreements and market liquidity conditions.
4. Overhaul of Base Rate Calculation: The association calls for a thorough review of the base rate calculation methodology, noting that previously discussed changes have yet to be fully realized.
5. Modernization of Credit Loss Management: The NBA urges NRB to introduce more flexible loan loss provisioning regulations that align more closely with standard international banking practices.
6. Open Market Policy for Service Charges: To foster healthy competition and technological investment, the current regulatory caps on banking service fees should be removed, leaving them to be determined by open market dynamics.
- Digital Banking, Technology, and Cybersecurity
7. Recognition of In-App Notifications: Instead of making costly SMS alerts mandatory, the central bank should officially recognize "In-App Notifications" within mobile and internet banking platforms as a valid, official transaction communication medium.
8. Unified Anti-Fraud Platform: In response to the rising wave of cybercrimes, a joint, real-time platform involving law enforcement agencies, commercial banks, and regulatory bodies should be established to combat digital scams.
9. Centralized Customer Identification (KYC) System: The immediate implementation of a centralized, integrated national KYC platform is requested to streamline identity records and due diligence across the financial sector.
10. Mandatory QR Code Interoperability: To maximize consumer convenience, cross-network interoperability between all different payment and QR code operators should be strictly enforced.
11. Integrated Digital Trade Platform: The NBA advocates for a centralized digital network connecting the Department of Customs, NRB, and commercial banks to simplify and accelerate import-export trade processes.
III. Institutional, Operational, and Financial Management
12. Relaxed Branch Closure Regulations: Banks seek autonomy to close down redundant or saturated branches in municipal, sub-metropolitan, and metropolitan regions without needing prior regulatory approval from NRB.
13. Shorter Inactive Account Lifespans: The current 10-year window required before closing inactive, zero-balance accounts should be shortened to 5 years.
14. Digital Account Closure Facilities: Regulations should allow customers the convenience of closing their bank accounts seamlessly through digital channels.
15. Expansion of CSR Scope to Financial Literacy: Educational programs on financial literacy conducted through banking associations should formally qualify as valid corporate social responsibility (CSR) expenditure.
16. Incentives for Private Equity & Venture Capital: To encourage startup funding, bank investments into private equity and venture capital funds should not face deductions from the capital fund up to 5% of their primary capital.
17. Commercialization of Non-Banking Assets (NBA): Legal mechanisms should be instituted to enable commercial banks to lease out, manage, or actively utilize the non-banking real estate assets currently in their possession.
18. Establishing a Secondary Securities Market: A dedicated secondary market should be developed to allow banks to quickly liquidate securities into cash when required.
19. Debenture Redemption Fund Flexibility: Rules should be modified to permit banks to utilize capital accumulated within their Debenture Redemption Funds to issue bonus shares to investors.
20. Interdepartmental Policy Clarity Mechanism: To resolve ambiguities in regulatory directives, the NBA suggests forming a permanent, fast-track internal coordination cell within the NRB to provide immediate policy clarifications to commercial banks.
21. Relaxed Rules for Overseas Branches: The central bank should review and ease current Non-Performing Loan (NPL) ratios and supervisory requirements linked to Risk-Weighted Assets to make it more feasible for Nepali banks to expand and set up branches abroad.
22. Optimization of NOP and NDF Transactions: To better utilize Non-Deliverable Forward (NDF) operations, a specific portion of Indian Rupee (INR) holdings should either be excluded from the Net Open Position (NOP) calculation or the existing NOP limits should be raised.
