According to World Bank 2024 data, Nepal is only above Afghanistan, a country embroiled in a long conflict in South Asia, in terms of per capita income. And, in terms of human development index, it is only above Afghanistan and Pakistan. Our per capita income is only about 11 percent of the world average.

Examining this data provides a major answer to the question of why a large number of Nepalis are still forced to be poor.

Among the various reasons for Nepal's economic backwardness, the main reason is the lack of good governance. In a country where various important positions are not selected on the basis of merit, except for exceptions, but are sold by rulers looking at personal and party benefits, and there is no system of rewards and punishments based on performance, it is not surprising that the country has less development than its economic potential. We have structured the country in such a way that it is difficult for a person who says that he will follow the rules and regulations, will not listen to anyone, and will not bribe anyone to do business. Due to expensive elections, expensive housing, expensive education, and expensive health, even politicians who are said to be honest and public servants from various fields have become corrupt. The reports of the Commission for the Investigation of Abuse of Authority have presented a distorted picture of our misgovernance.

There is relatively good remuneration in the banking sector, including Nepal Rastra Bank. Perhaps that must be the main reason why relatively few cases of corruption are heard in the banking sector. Complaints of corruption are also heard more in some banks with weak governance. 

When will the system of rewards for good work and punishment for bad work or inaction be implemented in our government mechanism? The first Financial Sector Development Strategy (2073/74–2077/78) prepared by the Government of Nepal was completed in Ashar 2078. The second strategy was to be implemented from Shravan 1, 2078, and a committee was also formed to formulate it. However, it was issued only in Magh 2082 (after 41/2 years). During this period, Sher Bahadur Deuba, Pushpa Kamal Dahal, KP Oli and Sushila Karki became Prime Ministers. During this period, Janardan Sharma, Bishnu Poudel, Dr. Prakash Sharan Mahat, Bishnu Poudel and Rameshwor Khanal became Finance Ministers.

It could only be issued when Sushila Karki, who became Prime Minister after the Gen-G movement, and Rameshwor Khanal became Finance Ministers. It could not be issued when people from political parties were Prime Minister and Finance Minister. How can we trust that those who do not formulate a strategy for the financial sector (banks, insurance, capital markets, cooperatives, and non-banking financial institutions including employees' provident funds), which is known as the backbone of the economy, will build the country? 

Nepal Rastra Bank's Board of Directors

We know that the Board of Directors of Nepal Rastra Bank formulates policies related to the banking sector, payment system, monetary, and foreign exchange. The Nepal Rastra Bank Act, 2058 has provided that the members of the Board of Directors, including the Governor, should not be affiliated with any political party, have high moral character, and be distinguished in the fields of economics, monetary, banking, finance, commerce, commercial law, and management. However, with exceptions, it does not seem that a person who is not close to any big leader or party has been appointed. We banking professionals sometimes joke, ‘If the Act were amended to state that only a person close to the then ruling political party leader would be appointed as governor, the Act would be fully complied with.’

The Act clearly states that 2 deputy governors should be from ‘special category officers’ of Nepal Rastra Bank and that 3 independent directors should be appointed ‘from among distinguished individuals in the fields of economics, monetary, banking, finance, commerce, management and commercial law, representing different sectors.’ However, all three independent directors currently appointed are former employees of Nepal Rastra Bank. If Nepal’s banking sector is to be improved, the legality of the Nepal Rastra Bank’s board of directors is a prerequisite.

With exceptions, political parties have full influence on the appointments made by the Government of Nepal. No matter how distinguished an individual is, closeness to the leaders of political parties must be increased for the Government of Nepal to make appointments. Let us imagine how much pain it would be for a respected and respected person from a certain field who has the idea of ​​doing something for the country to have to go to the leader's house for his appointment? If the Public Service Commission is given the responsibility of such appointments, this disease can be cured to a large extent. 

Despite all these difficulties, the Public Service Commission has been keeping the lamp of hope burning till date. The Parliament should amend the law and create such a structure within the Public Service Commission, which would also be responsible for the appointment of most of the high positions made by the Government of Nepal, including the Board of Directors of Nepal Rastra Bank. It is equally important to monitor that the impartial structure of the Public Service Commission is not damaged. 

Board of Directors of Banks and Financial Institutions

It is the duty of the Board of Directors to formulate the policy of its bank/financial institution while respecting the prevailing law. If the concerned bank/financial institution is to be made good, it is a prerequisite that the Board of Directors of that institution be independent and professional.

The current practice of appointing only 1 independent director and the rest shareholder directors in the board of directors seems to have compromised the interests of depositors in some institutions from time to time. Since big businessmen are the major investors in the bank, the general public has also expressed their anger and accusations from time to time that big businessmen misused the resources. It is not easy for big investors to misuse the bank's money, but since they benefit from concessional interest rates and priority in the event of a shortage of loanable funds, etc., the structure of the board of directors can be formed in accordance with international best practices to minimize this conflict of interest - independent directors: minimum 50 percent, executive directors: 1 person, shareholder directors: maximum 3 people.

The Nepal Rastra Bank should issue criteria for independent directors to be completely independent. Arrangements should be made for only those who are impartial, have a clean image, can withstand rumors and unnecessary pressure, have good knowledge of banking, put the interests of depositors at the center, are not affiliated with any political party, are not related to significant shareholders, and are of good reputation. Providing non-executive directors with a good monthly salary in addition to meeting allowances, like in India, can attract people with the above qualities to the board of directors. 

No compromise should be made on the arrangement that directors, founders, and shareholders with more than 0.5 percent ownership of the concerned institution cannot take any type of loan except for 100 percent of the deposit placed in the concerned institution as collateral. If directors of other institutions and shareholders with significant ownership want to take a loan exceeding the small loan limit set by Nepal Rastra Bank, only the board of directors will approve it and shareholder directors will not have voting rights in that decision. This will ensure that the complaints of the general public and small investors are properly addressed. As per the above, after the formation of the board of directors, the regulatory and supervisory burden of the Rastra Bank will also be reduced. 

Customer-friendly service

Although the service in the banking sector is comparatively good due to competition and the use of technology, it seems that there is still much room for improvement when analyzing customer complaints. 

The interest rates and service charges of banks and financial institutions are not the same, so it is difficult for customers to compare and choose banks and financial institutions. Nepal Rastra Bank should issue the same format in consultation with bankers' associations and make arrangements to view comparative details of interest rates and service charges on the websites of Nepal Rastra Bank and various professional associations. Similarly, arrangements should be made to keep a record of which documents the customer needs to submit for which service and how many days it will take to complete the work after submitting all the documents. How much compensation will be given for each day of delay? It is also necessary to keep a record of this. 

It seems that banks make customers sign a lot of documents while disbursing loans. Nepal Rastra Bank has room for extensive improvement in this. It seems that every employee of the institution should be given training that 'customers are living gods and goddesses, they should be respected' at the time of service entry and every year. Such training should also be provided to security personnel, messengers, etc. By including topics such as the Panchashilas of Buddha in the course and teaching them to say 'no' politely, customer complaints can be reduced. 

It seems that the language of correspondence with customers (including email, SMS, etc.) should be Nepali or English based on the customer's choice. Nepal Rastra Bank rewards organizations that correspond even in local languages. 

Nepal Rastra Bank, after studying international practices related to reverse mergers and making this service available in Nepal, will bring financial ease to the lives of senior citizens. 

To reduce the problem of meter interest, let's effectively implement the system of determining the loan repayment schedule based on agricultural crops in cases where only agricultural income is earned. Let's make arrangements to provide loans of up to 5 lakhs per family on the basis of collateral. 

It is necessary to have impartial and expert persons in the recruitment and promotion committee so that the quality of employees of each organization is not compromised. Every time the members of the committee should declare themselves to have done their job impartially and if any member of the committee is found to have not done his job impartially, other members should raise questions with that member and take necessary action, the quality of employees will improve and customer service will also improve. 

Nepal Rastra Bank's complaint management function, which listens to customer complaints, is currently effective. This work will be more effective if the Grievance Hearing Committee is reconstituted under the coordination of a person (former governor of Nepal Rastra Bank or former judge) who has an impartial, clean image, can withstand gossip and unnecessary pressure, and has good knowledge of banking to hear and decide on the complaints filed against Nepal Rastra Bank and its officials/employees. 

Contribution of the banking sector to employment growth

Currently, commercial bank branches have reached 753 local levels. On the one hand, more than 22.5 billion foreign cases have been accumulated in the country, and foreign currency is being added. However, due to the lack of sufficient efforts to create employment in the country by utilizing that money properly, Nepalis continue to go abroad in search of work, and villages are becoming youthless.

Nepal has ample potential for job creation in advanced agriculture, tourism, water resources, minerals, technology, etc. For the development of these sectors, it is necessary to bring in not only domestic but also foreign investment and technology. Investment in infrastructure sectors such as transportation, education, health, and the justice system should be increased. The reason why Nepal's banking sector is relatively good today is because of the foreign investment that was attracted to the banking sector in the 1940s. Just like the monthly and annual targets set by banks for employees, we need to set foreign investment targets for the relevant ministries, all embassies, and all consulates. 

Although the main responsibility for creating high-income jobs lies with the Government of Nepal, the Nepal Rastra Bank can also do the following (in some cases, in coordination with the government): The Governor should hold a formal meeting with the Presidents of the Federation of Nepalese Chambers of Commerce and Industry, Confederation of Industries, Nepal Chamber of Commerce, Nepal Bankers Association, and the Secretaries of Finance, Agriculture, Tourism, and Industry at least once in three months, and the Governor himself should monitor the minutes, which will quickly resolve the policy and practical problems of businessmen and bankers. Although banks have reached all local levels, credit flow from most rural branches has not been as expected. In addition, the non-performing loans in agricultural and small business loans that banks must disburse are almost twice as high as other loans, highlighting the risk of commercial loans without financial education. To address this, Nepal Rastra Bank needs to arrange for financial gurus –

- In coordination with the municipality and the association/federation of municipalities, interested municipalities will select 3 successful people from their fields: 1 businessman, 1 banker and 1 NRN. With the help of these gurus, the face of the municipality can be changed by identifying, financially managing and successfully operating high-return businesses in that municipality.

- The gurus will conduct financial education programs for at least interested individuals every quarter.

- This work can be done effectively at low cost by selecting retired people who have emotional ties to the municipality.

Nepal Rastra Bank should periodically involve experts/institutions from outside the bank to study which sectors of Nepal are priority sectors (a country without good health, education, and transportation cannot be rich, but these sectors are not currently covered by the Rastra Bank's directed lending. Similarly, the value chain of organic food, tourism, and smart cities are also not covered) and how much credit is needed in that sector, and then take a policy to encourage banks to provide credit in that sector (in terms of risk weight, loan loss provision, etc.). Priority credit based on rewards, not punishment, should be the future direction.

Roads leading to major tourist destinations in Nepal, such as Janakpur, Lumbini, Rara, Kathmandu, Rasuwagadhi, Tatopani, Sagarmatha (only up to Namche. From there, trekking, cable cars, etc. are used), Pokhara, Muktinath/Korola, etc., should be made of international standard. When these roads are built and operated by the private sector in collaboration with international companies, Nepal's immense cement resources can be utilized. (Looking at the cost of the Melamchi drinking water project, Pokhara Airport, Bhairahawa Airport, electricity projects, etc. made by the Nepalese government, the Nepalese government does not seem capable of making quality plans on time and at a low price. Until the Nepalese government's mechanism is capable, it is appropriate to do capital expenditure by the government and not by the private sector, as long as it is practical. 

Suggestion to the Ministry of Finance to set operating standards for the railway in the Kathmandu Valley, gas extraction in Dailekh, and iron extraction in Dhauwadi to benefit the Nepali people through the private sector. Such loans should be given priority and various concessions should be provided. 

Let us develop the idea that most of Nepal's territory is mountainous, not a curse, but a blessing. By making minimum compromises on environmental balance, let us develop a smart city (with all modern facilities) in collaboration with international companies in a place where the sun kissed Mount Everest can be seen from home, by leveling a few kilometers of mountains as a pilot project. Let us arrange for foreigners to buy houses in such cities on a fixed-term lease, and encourage international companies to open. 

The number of rich people is also increasing in Bihar and Uttar Pradesh 6. Their nearest hill station is Nepal. The weather from Ilam to Dadeldhura not only attracts people from Bihar and Uttar Pradesh to visit, but there is also a great possibility that wealthy parents can send their children to Nepal for school education. If good roads and schools can be built in these areas, the number of foreigners staying in Nepal for a long time like Singapore can be increased. 

Financial education

To help the general public make the right financial decisions without following the crowd, it is necessary to open a Nepal Financial Education Center under the leadership of Nepal Rastra Bank, including the Securities and Exchange Board of Nepal, the Nepal Insurance Authority and the Cooperative Authority. The center should coordinate with the relevant bodies and the financial gurus of the municipality to teach financial education right from school. 

It is necessary to establish a strong mechanism in Nepal Rastra Bank to continuously update itself on the AI ​​changes that have come to the world regarding neo banks, information technology, cybersecurity, fintech, regtalk, payment systems, digital currencies, crypto currencies, etc. and to periodically advise banks and financial institutions. While granting licenses to neo banks as mentioned in the budget and monetary policy, there should be impartiality And a committee should be formed under the coordination of a courageous former governor or a prominent banker and work with transparent criteria that will benefit the economy so that pressure from leaders does not gain ground. 

Banking Offenses and Punishment Act

There is no doubt that those who commit banking offenses should be punished, but since this act has currently created terror even for honest bankers who work with good intentions, in order to retain and attract good people in the banking sector, this act should be repealed following the developed countries and all bank fraudsters including bankers should be taken action in accordance with other prevailing laws. Similarly, it is necessary to take legal action in time against those who take the law into their own hands and harass bankers and customers. 

Classification of banks and financial institutions

One of the main reasons for Nepal's backwardness is the application of the same rules to all, good and bad. In Nepal, there are banks that are good in good governance and also very weak ones. However, the same rules are being applied to all. Since most of the rules were brought keeping in mind the weak banks, good banks sometimes feel that they are being squeezed out. They do. If good banks are regulated and supervised less and bad banks are regulated and supervised more strictly, the banking sector will become more competitive. By classifying institutions as first (AAA), second (AA), third (A) based on customer service, overall risk management assessment by the National Bank, actions taken against banks and financial institutions, financial health, etc., and giving various discounts and rewards to those in the first and second categories, others will also be motivated to join the first category, which will bring positive changes in the banking sector.