BFIs mull reducing working days to five a week

Monday - 2nd November, 2015 | www.myrepublica.com | General News

Banks and financial institutions (BFIs) have said unrest in Tarai districts and blockade imposed by India is hitting their daily operations.

Bankers that Republica talked to say unrest in Tarai districts and supply obstructions is not only punching a hole in the balance sheets of BFIs but also making it difficult for them to provide regular banking services to clients.

Considering the situation, BFIs are even mulling over reducing their office hours. Anil Keshary Shah, vice president of Nepal Bankers Association (NBA) told Republica that BFIs are now planning to provide banking services only for five working days in a week. "In this difficult situation, BFIs will no more be able to provide normal services. We are planning to bring down working days to five per week from six days a week," Shah said, adding, "The decision will be taken within couple of days if the situation does not improve."

Many BFIs have already suspended their extended business hours and holidays counters. "We are finding it very difficult to continue normal banking services due to shortage of diesel and petrol during load-shedding," Shah added.
Data centers of BFIs need uninterrupted power supply round the clock to run accounting software and provide services from their ATM terminals, among others.

Bankers also lament that the shortage of petroleum products has made it difficult for BFIs to move cash to and from banks' branches to Nepal Rastra Bank (NRB) and replenish cash in their ATMs. Most of the BFIs have pasted notice in their ATM terminals, stating that the 'service is unavailable during load-shedding in the absence of power back-up'.

"As the current situation is constraining the ability of clients to reach offices of BFIs, we are compelled to scale back our services," Shah, who is also the CEO of Mega Bank Ltd, told Republica.

Krishna Raj Lamichhane, president of Development Bankers Association, Nepal, also shared similar woes. "Branches in Tarai have already been closed. Even in Kathmandu and other districts, we are not able to go to the field to see the business sites of borrowers, follow up about loans utilization, and transport carry cash to and from the branch offices. The mobility of our staff members has also been affected," he added.

Earlier last week, the central regulatory bank announced loan restructuring and rescheduling to industries and businesses hit by the recent Tarai unrest and the Indian blockade. The central bank has come up with some relaxation provisions to industries and business firms for repaying their bank loans, responding to requests from the private sector. It has also introduced relaxed loan loss provisioning for BFIs on loans of borrowers whose repayment capacity has been eroded by the recent turmoil.

Shah said the impact of Tarai unrest and Indian blockade on balance sheets of BFIs will be far higher than the impact made by the devastating earthquake of April 25.

The ongoing turmoil is leading to a cash crunch in around 15 Tarai districts where Madhes-based parties are imposing bandha for the past two months, according to Republica correspondents there. All the businesses, including BFIs, there have come to a complete halt. According to NRB, there are a total of 996 branch offices of 'A', 'B', 'C' and 'D' class BFIs in these 15 districts.

Closure of bank branch offices in Tarai, which is considered the lifeline of business and economy, has also hit deposit and loan mobilization of BFIs.

Though there is no exact data of deposits mobilized in these districts, NBA President Upendra Poudyal estimates that around 30 percent of total deposit collections come from Tarai.
Credit expansion has come to a grinding halt, while overall deposit is increasing amid rise in flow of remittances.
According to NBA, 30 commercial banks mobilized deposits of Rs 1,483 billion and disbursed Rs 1,112 billion in loans as at October 2.