Discussions on the Banks and Financial Institutions (First Amendment) Bill (Bafia) prepared with a proposal to amend the provision that the same person can run a bank and also run a business, have started in the Finance Committee of the Federal Parliament. Although it has been discussed for a long time, the parliamentarians discussed the issue of separating bankers and businessmen, which was considered complicated, in the Finance Committee meeting held on Monday.

As this issue is very complicated in the context of Nepal, the Finance Committee has decided to ask for the official opinion of the National Bank on how to proceed with it. In the meeting, some MPs argued that since the bill was prepared in 2080, it should be rewritten. What is the issue of rewriting the bill or moving it forward, separating bankers and businessmen? Regarding what is the international practice, the committee has decided to seek an official opinion from the Rashtra Bank," said Santosh Chalise, Chairman of the Finance Committee. "If there are still any additions to the bill, we have asked to submit suggestions in writing within seven days." What is the difference between a banker and a businessman? Can a businessman be a banker and a banker can do business or not? What is the international practice?' He said, 'How will this arrangement affect Nepal's banking system? Let the Rashtra Bank's official views and suggestions be received regarding the amendment of this bill.

Rashtra Bank Governor Vishwanath Paudel asked the Parliament to be sensitive to the proposal to change the structure of the current financial system in the Bafia Bill.

Bank and financial institution managers can take loans or not? How much can be taken between bankers and businessmen or not? In other countries, bankers and businessmen cannot be the same. The way the loan has been flowed now, there seems to be a conflict of interest. What are its challenges? It seems that this issue is legally clarified in the bill,' he said, 'The main thing is that the people who have the said ownership and the people associated with the bank do not have rights over the loans. How much they should own is another matter. This law largely dictates where the new system will take the country. This is very sensitive and the biggest thing. It includes the  Meditate.'  Governor Poudel said that since the provision in the

bill will determine our economic future, some policy arrangements have been proposed in the bill to change the main economy, credit structure and bank structure. Paudel's argument is that if these provisions in the bill are passed and implemented, the structure will change like an earthquake in the financial system.

In the proposed bill under discussion in the Finance Committee, there is a provision that the same person cannot be both a banker and a businessman. In the bill, it is proposed to separate bankers and businessmen by providing that they cannot take loans from other banks and financial institutions if they have taken more than one percent of the paid-up capital of any bank.  The

bill has changed the limits of share investment and loans of companies, groups and family members and has made a strict proposal in the relationship between bankers and businessmen. In section 52 of Bafia, it is proposed that banks and financial institutions cannot provide any kind of loan or facility to any person related to them or to any person who has significant ownership in any bank. At present, only one institution had such a provision. But by adding substantial ownership and its definition, the bill has made a new proposal that loans cannot be taken from other banks and financial institutions. Clause 2 of the Bill amended the provisions relating to substantial ownership to one per cent or more of the paid-up capital of the institution. There is another strict provision in the

bill that a person who has borrowed more than one percent of the paid-up capital cannot be a director of the same bank or financial institution. This is a new arrangement than the current one. "A person whose total commercial debt taken by a related person or his family or a company or organization related to him and his family exceeds one percent of the paid-up capital of the bank and financial institution he wants to be a director of will be disqualified from becoming a director," the bill states. It seems that the

bill seeks to prevent bankers from becoming businessmen and businessmen from becoming bankers both on the basis of share investment and loans. For a long time, homework has been done to separate bankers and businessmen based on the conclusion that there is a problem in the financial sector because when the same person runs both a bank and a business, there is a conflict of interest. In the bill, the regulatory process of the National Bank is also sought to be regularized and more effective. 

According to this, in order to make the monitoring of the utilization of the loan amount more effective, the bank and financial institutions have to monitor every 6 months whether the borrower has utilized the loan amount for the purpose for which the loan was given to the borrower or not. Currently, it is mentioned that regular monitoring will be done by making a schedule, but it is not specified that it is half yearly. Due to this, there is a tendency to monitor when it is not available.

"A director may be re-appointed as a director for another term after the expiration of his term," the bill states. In the case of independent directors, the existing arrangement remains unchanged. Previously, the parliamentarians who were also directors of banks and financial institutions had revived the old system by adding the provisions of executive chairman or managing director, which had been removed in the past, to the Act. Currently, there is a rule that the chief executive officer cannot work for more than two terms in the same organization. But directors can be appointed for as many terms.