#26 19 - 25 January 2001 20 pages Rs 20 EXCLUSIVE Free to be poor Having waited for six months for government support, kamaiyas freed from bonded labour are losing their patience and say they will settle on any piece of unclaimed land. Kamaiya activist Dilli Chaudhary says: “First, they told us they’ll give us land by Dasai, then Tihar, now Maghi is over and we’re BINOD BHATTARAI still waiting.” Destitute kamaiyas had no ○○○○○○○○○○○○○○○○○○○○ cause to celebrate their biggest annual ast year, international auditors discovered festival on 14 January. There are an lsome fishy goings-on in two of Nepal’s estimated 16,500 kamaiyas in the foremost banks. Now, it’s not just fishy any western tarai districts of Nepal and most more: Nepal Bank Limited (NBL) and Rastriya Banijya Bank (RBB) are on the verge of collapse. Almost half their assets are non- performing, loan recovery is down to a WHAT IF? catastrophic 25 percent, and their cash ratios (adequacy) are billions of rupees short of the Two of Nepals biggest banks are insolvent. Rs 45 billion worth of mandatory minimum. “There’s no doubt that the two banks are depositors savings is in danger. The largest borrowers are the ailing and failing,” admitted Bimal Koirala, NARESH SHRESTHA biggest defaulters. Banking reforms are the only hope. secretary at the Ministry of Finance. He told of them are now camping in the open the parliament’s Public Accounts Committee bad shape is not news. The Commercial Bank resolve the crisis, like handing the banks over like on the ground,” says a foreign economist after they were “freed” by government last week that only major reforms can ensure Problem Analysis Strategic Study (CBPASS) in to external management, but politicians have who has studied Nepal closely over 10 years. decree in July. that some Rs 45 billion worth of depositors’ 1992 had already warned of a crisis. But an unspoken worry that skeletons are going to “The hole is getting bigger every day we fail to The government recently savings are not lost. This was a shocking announced it was distributing parcels of nothing was done, and last year international topple out of their closet if outsiders are let do something.” land to 62 families, but Chaudhary and admission by a senior government official, and auditors KMPG estimated the negative net in. For the opposition, it has been just too Part of the blame for today’s mess is the NGO sources say they don’t know of one that could trigger a run on the banks. But worth of the two banks to be anywhere tempting to flog the government by opposing Nepal Rastra Bank which has always acted like anyone who has received land yet. The it was also an indication of just how serious the between Rs 20 and 25 billion (depending on “externally-dictated” reforms. The interests of a government department rather than an kamaiyas now plan to identify situation is. who’s counting) and declared them some 40 major defaulters (a literal Who’s independent regulator. All it can do now is unclaimed farmlands, and start Every politician present at the hearing “technically insolvent”. It blamed bad Who of Nepal’s business elite) is also delaying hope things will work out. Governor of Nepal occupying them. Chaudhary says his seemed to agree. But their statements showed management, bad accounting, bad supervision a decision. Nepal Bank’s board members, Rastra Bank, Dipendra Purush Dhakal, told people will measure 10 katthas—an more myopic partisan grandstanding and and excessive political interference in the past who know very well that the value of their us: “A turnaround is possible. If that can be area 40 by 40 cubits—for each family blame throwing than desire to address the seven years for the woes. equity is in the negative, want the government done with the smallest effort today, why not and build their huts. There is fear that crisis itself. Leftist politicians are neither There are ways to to pay for the new management team but still do it and take a chance to make the banks the local administration may give some convinced about the government’s reform want to call the shots even after the new profitable again?” trouble. “But since they’ve seen the plan, nor are they offering alternatives. The worst, they now seem ready to face it,” managers arrive. That effort would cost $25 million, and says Ashutosh Tiwari, a Kathmandu- PAC is meeting again on 19 January to review In case the banks do collapse, losses will the World Bank may be agreeable to lending based activist now in Dhangadi. a crucial sub-committee report on the issue. be staggering. The collective assets of NBL the amount but only if the government comes That NBL and RBB are in and RBB run up to Rs 80 billion and the two up with an acceptable reform plan. Other control over 60 percent of all banking donors and creditors will be watching those transactions in Nepal. Because the reforms keenly. Acceptable financial sector government doesn’t have the money needed reforms are also a pre-requisite for Nepal to GAGGING RADIO to rescue the banks, small and big depositors qualify to use money from the IMF’s Poverty stand to lose their savings. And the 10,000 Reduction and Growth Facility. Nepal is a public radio pioneer in South Asia. It was the first employees of both banks will not just lose The financial reform agenda at present country to allow community radio stations in 1997 when their money, but also their jobs and pensions. hinges on amending the laws to make the Radio Sagarmatha went on air in Kathmandu. Nepal has also been more liberal than others in the region in allowing It is a nightmare scenario and the money Nepal Rastra Bank independent, and more private FM broadcasters. The deregulation increased involved is so staggering that the government capable of supervision and monitoring. A bill credibility and professionalism of radio, made the medium doesn’t even seem to want to think about it. to that effect is to be tabled in parliament in interactive and citizens more aware of news and trends. We’re told that some major depositors are the upcoming session. NBL and RBB reform But it seems the government doesn’t think so. A sudden beginning to show signs of panic: the Royal plan also includes: decision by the Ministry of Information and Communication on Nepal Army and the Employees’ Provident l Selecting and appointing external 2 January (circulated to radio stations on 16 January only) Fund have already withdrawn about Rs 2 management teams; banned the broadcast of independent news and current affairs billion of their mature deposits from one of l The teams take over day-to-day bank on FM. A clause in the FM licence disallows news broadcasts, but to quote sources and “verify facts” before they go on air. the two banks under various pretexts after the management; the government claims private FM stations were circumventing it “This is exactly how zonal commissioners used to behave in KPMG report became public. l Work on a time-bound plan to address by reading a selection of daily newspapers without checking Panchayat days to control the press,” says Raghuji Pant, UML The crisis did not come overnight. The issues such as the high default rate; and facts. Sources at the ministry told us the decision was taken by MP and a former journalist. “You cannot be more undemocratic banks lent unwisely, often under political l Have them function as real banks in two journalist-turned-minister Jaya Prakash Prasad Gupta himself in than that.” The Parliament’s Development Committee has years. the aftermath of the street riots 26-27 December. Some FM decided to order the Ministry to send copies of all FM station pressure, pouring good money after bad into stations were blamed for inciting tensions by broadcasting licences and call officials over to explain reasons behind the moribund sectors like textiles, sugar and steel. There’s a sense of urgency about seeing jingoistic reports and songs. Interestingly, the government move decision. The hearing is to take place on 24 January. Worse, they waited two years after the firms these reforms through. According to the comes at a time when Gupta himself has been under fire from The distinctive and popular voice of Radio Sagarmatha, defaulted to begin taking action to get their timeline, the deadline for management the media for demanding an apology from the Indian actor which relied heavily on its own news and analysis, has been worst money back. Most loans were secured against contract proposals is next week, and they will Hrithik Roshan for rumoured comments about Nepal that incited hit. The station had popular talk shows, news programmes, panel property, often over-valued, which are now be evaluated by mid-February. Negotiations the violence, but which later proved to be false. discussions and phone-ins. The station is run by a group of not worth much because of a real estate crash. with selected teams is to begin in March, and Bharat Koirala, the one Nepali who has been engaged in a environmental journalists and was already under pressure from Now the largest borrowers are the biggest the new management team is expected in crusade to promote community radio and campaigned five the Ministry, which hadn’t renewed its licence. Kantipur FM, the defaulters. Financial analysts say the situation Nepal by the Nepali New Year. Whether or years to get Radio Sagarmatha its licence, is not happy with the other station with substantial current affairs content, defied the is now much worse than it was depicted in not it will be a happy 2058 will depend on decision.