KATHMANDU: Nepal Rastra Bank, the central bank of Nepal, has unveiled the report submitted by the Banking Sector Reforms Recommendation Taskforce.

The taskforce was formed by the central bank under the leadership of Dr Rewat Bahadur Karki to recommend comprehensive reforms in order to resolve the critical problems emerged in banking sector due to slack economy, high liquidity, increasing passive loan and non-banking properties.

The taskforce has put forward several agendas for reforms ranging from banking policy, regulation, credit flow, rural economy, merger, grey list and stock market.

It has drawn a conclusion that structural reforms are inevitable in the context when the economy has not turned fully functional, investment flow has become weak and liquidity is dumping in a passive state.

The report has laid high emphasis on ensuring effective supervision and oversight based on risks by making the banking policy regulation liberal but prudential.

It is recommended to execute different directives by categorizing banks and financial institutions into three classes based on the standards.

The report has suggested reviewing the regulated lending policy, increase credit flow to the education, health, transport and green sectors and develop an integrated mechanism to comparatively see the cost and interest of the banking service.

Likewise, the taskforce has identified a need to put in place a separate regulatory for microfinance institutions for its separate nature.

As the report states, there is a need of separate regulator for the non-banking institutions such as the Employees’ Provident Fund, Citizen Investment Trust, and Social Security Fund when their investment flow is on the rise.

The taskforce has advised to restructure the loan, immediately place subsidiary loan programme, make arrangements of additional loan immediately place subsidiary loan programme, make arrangements of additional loan for revitalizing small-scale entrepreneurship keeping the interests of the depositors at the centre.

Among other recommendations include implementing ‘Rastra Bank in Rural Area’, policy amendment on credit demand after comprehending possibilities and challenges, identifying potential industries, advancing merger and acquisition, and making central bank’s role further effective in baling the country out from Grey List.

The report has also recommended recalling the central bank representative from NEPSE, adopting best global practice in margin lending, facilitating the NRNA in secondary market and coordinating with Securities Bond of Nepal for the development of bond market including green bond.