Budget talks of financial sector dev strategy

THE government in the new budget has announced a financial sector development strategy to maintain financial stability, expand financial inclusion, and

strengthen the capital market and insurance sector. In a bid to regulate and control saving and credit cooperatives, the budget has announced that Department of Cooperatives will carry out a special inspection of cooperatives having an annual turnover of Rs 500 million with the help from Nepal Rastra Bank till a separate regulator is formed for the purpose. However, the government has failed to bring effective programmes to address the ongoing anomalies in the sector that has been facing the shortage of effective act and regulation along with the human resources crunch. The budget has continued the policy of the previous budgets that the cooperative sector is one of the three pillars of the economy. “The country’s development will be carried out through the effective coordination among the cooperatives, the private and public sectors,” states the budget. Apart from the cooperatives, lack of effective programmes saw to address the other financial sectors. The budget has talked about amending the acts concerning the reform in the bank and financial institutions (BFIs). However, the work seems difficult at the time when there is no elected legislature to endorse the related acts. Likewise, the government has reiterated to regulate the commodity market. As in the previous budget, the government has targeted to regulate the sector through the Security Board of Nepal. The budget has targeted to operate the Nepal Stock Exchange transactions online. “The institutional and non-resident Nepalis’ investment in the capital market will be promoted,” it states. However, this is not the first time that the annual budget has mentioned such a provision. Likewise, the budget has also planned to bring a favourable policy to allow an international organisation with high credit rating to issue the bonds in the local currency. Through the provision, the government has targeted to manage capital for big projects. Although the budget has planned to promote mergers of the BFIs and insurance companies, it remains silent on the possible change in facilities being provided to the companies planning a merger. The budget, however, turned down the possibility of merger of the NIDC Development Bank with Rastriya Banijya Bank which had been initiated earlier. The government has forwarded its plan to change the NIDC into Infrastructure Development Bank through capital injection. The budget has also mentioned about legal and structural reforms and capital increment of the Deposit and Credit Guarantee Corporation to enhance the insurance of the deposits with the BFIs. To promote the farm insurance, the government has allocated necessary amount to provide 50 percent subsidy to those who insure farm products, including horticulture, vegetable farming, birds rearing and fisheries. It has also envisioned managing necessary legal and institutional provisions to establish a reinsurance company.