March 19: Dr Chiranjivi Nepal retired from service on Tuesday (March 17) after five years in office as the governor of Nepal Rastra Bank. During his tenure, he raised the paid-up capital of banks and financial institutions by four folds and forced the merger and acquisition of BFIs to bring down their number and step up their quality. He will be remembered for the steps taken for big mergers, which he claims to be an achievement. However, experts say his term can be referred to as partial success.

When Dr Nepal was appointed the governor of the central bank on March 19, 2015, the paid-up capital of commercial banks was Rs 2 billion. He took measures to ensure that the paid-up capital was raised to Rs 8 billion so that the banks could cope with adverse situation.

On the other hand, development banks in the country are reeling under loss but he did not succeed to bring down their numbers.

The Ministry of Finance was accused of trying to infringe upon the independence of the central bank during his tenure. He, however, decided to stay silent on the issue.

Although the decision to increase the paid-up capital of BFIs has been considered as a commendable step, the decision to allow the increase in capital from the right share is believed to have less impact in reducing the number of banks than expected. This is also believed to be one of the reasons behind the lack of investible capital with the banks of late.

Soon after his appointment as NRB governor, the country faced devastation due to the catastrophic earthquakes. Subsequently, Nepal had to face economic blockade from India during his tenure.

“To maintain stability during such crisis is a great challenge,” said Analraj Bhattarai, a former banker.

“The number of banks could have been reduced much more had the governor focused on merger and not brought forward the concept of right shares,” added Bhattarai.

“He couldn’t handle the situation in the right way,” said Bhattarai.

Bhattarai stated that the merger process could not become effective as the governor was not clear on whether the decision to increase the paid up capital was to make the banking sector strong or to reduce the number of banks.