NRB brought Cap on Call Deposit!

As per NRB new circular issued as on 24th may 2019...an "A" class bank can't accept deposit on call account more than 10% of their total deposit liability, like wise B class bank can accept deposit from call account only upto 15% of their total deposit liability. NRB relaxation up to ashad 2077 BS, to maintain the above ratio. 

Before this amendment Banks were allowed to accept deposit from call account up to 25% to their total deposit liability. 

What is Call Deposit Account ?

Call Account is a flexible interest bearing saving account that requires you to maintain a certain amount of deposit to earn you a pre-negotiated interest. Call Account also gives you the flexibility for unlimited withdraw. Furthermore , Current Account can be linked to call Account so that balance exceeding the agreed amount in current account can be transferred automatically to call account on a daily basis and earn you interest.

Why this cap on Call Deposit?

Through this circular NRB is trying to put cap on call deposit but why our central bank is doing so, doubt may arise in your mind?

Through this circular NRB concern seems to be focusing on liquidity issues in BFI, what is your understanding on today's issued circular?

Free Bank Account With Rs100 bonus balance!

Are you still unbanked ? Are you one of those who have no bank account with any bank? In nepal though bank have reached in most of the rular area, data shows that there are still many people who have no bank account with any bank. Considering unbaked population of Nepal NRB issued a new circular on Bank account opening campaign (#खोलौ_बैंक_खाता)  as on 10th April 2019(2075/12/27) for BFI class A, B & C.
NRB came up following provision to be followed by all BfI on said campaign:

1) KYC and related provision of Bank account opening campaign 2076:

As per this campaign to open bank account for all Nepali unbanked natural person following criteria and process should be obtained for KYC and confirmation.

👉 As per this provision BFI shall use simplified account opening form to open a bank account. Under this provision it is mandatory to obtain no multiple banking declaration during opening a bank account.

👉 For KYC and other confirmation should be based on citizenship certificate or Passport or election ID card with photo or National ID card or Driving license or Government issued photo ID or letter containing photo issued by local authority.

👉The maximum transaction limit shall be 1 lakh. KYC and other related confirmation should be obtained if transaction limit crosses 1 lakh.

 As per this provision BFI can make deposit of Rs 100 after opening the bank account.

Concluding...

NRB though this circular intended to attract all those Nepalese who still have no account with any bank. Now question arises will this circular impact positively and attract all those who have been remained unbanked? So as for this campaign BFI needs to use a simplified account opening form and bank shall deposit Rs100 in all those account meeting above criteria may attract those people towards banking. Certainly this is good step towards the vision of financial conclusion, and this will help to bring those unbanned population into banking Chanel!

Watch List

NRB came with a new directive (as on 29-11- 2071) which direct bank and financial institution to add one additional type of loan in their loan category as "Watch List".

BFI will have to classify their loan and advances into five category including "watch list" as new one.

What is "Watch List"?

As per the new NRB directive- A loan having met all the criteria of standard or good loan but showing sign of vulnerability will have to be categorized under a new type of loan i.e. Watch List.

# Pass loan(Not overdue and over due upto 3 month):
Loan and advances whose interest and principal is being paid by the  client on the regular basis or with in the time period of three month is called pass loan. The provisioning requirement for this kind of asset is 1% of total pass(standard) loan

# Watch list:
As explained above it is new category of loan which posses the characteristics of pass loan but carry/shows some amount of potential risk. The purpose of identification of potential NPL is to ensure that timely appropriate corrective steps could be initiated by BFI to protect against the NPL. As per new directive of NRB, BFI from now afterwards will have to maintain 5 % provision for this category of loan. As per NRB directive under below condition loans/advances shall categories under watchlist category:

a) Principal or intrest overdue by above 1 months

b) All Short term or working capital loan pending for renewal & all temporary extension.

c) All those loan which has been categorised under Bad loan

d) Despite of regular payment of interest & principal by Firm/company but suffering loss for two consecutive FY. But the loan provided to project under construction, these arrangements shall be applicable only after commercial production.

e) As per point numbers 33 of NRB directive all multi Banking loan which has not been converted in to consortium financing.

f) All those loner whose cash flow & week operations of the project & which is directed to keep under Watch List by NRB after  supervision

# Substandard Loan(over due by 3-6 month):
Under this category all those loan whose interest and principal remain unpaid for the period of three to six month is regarded as substandard loan. The provisioning requirement for this kind of loan is 25% of total substandard loan.

# Doubtful Loan (overdue by 6-12 month):
Interest and principle remain due up to six to twelfth month of due date is categorized as doubtful loan. The provisioning requirement is 50% of total doubtful loan.

# Loss Loan( overdue by 1 year and above):
Interest and principle remain due up to 1 year and more is termed as loss loan. 100% provisioning is made for this type of loan.

*Performing loan=
Pass loan+ watch list

*Non-Performing loan=
Substandard loan + Doubtful loan + loss loan

Conclusion...

Non performing loan is one of the major issue faced by BFI in nepal. Increasing level of NPL is putting pressure over banking industry of nepal. In this situation this new directive will have some positive impact in lowering the level of NPL in effective way.

Budget Basics

Budget is and instrument through which the government controls the entire economy where as budgeting is a process of preparing, negotiating and agreeing a quantified and specific plan for organization, normally for a year.

There for budget is a mirror to look the government developmental activities which sets a framework for policy formulation and implementation. This is also a means of legal control. Budget document is the good source of public information on past activities, present decisions and future on past activities, present decisions and future prospects. A significant feature of a budget is comprehensiveness that must include all government agencies and financial transaction...

Two component of Budget:

      1) Government Expenditure

      2) Government Revenue

Government expenditure can be classified in following ways:

      1)  Object Classification

      2)  Functional Classification; includes General public service and economic classification for example: Current Expenditure, Capital Expenditure, Net bending including net acquisition of equities  ; and Economic service includes Agriculture, Mining, Manufacturing, Electricity, Roads, Water transport.            

      3)Economic Classification:

Budget Cycle

Types of Budget

👉Deficit Budget:

👉Surplus Budget

👉Balance Budget

👉Program Budget

👉Line item Budge

👉Zero Based Budget

Program Budget:

Budget which is prepared keeping program as base is called program budget. In this type of budget there is per unit cost is determined. This budget has been started by Hoover Commission in America in 1945 AD. In Nepal this budget came in to existence for development expenses. In 1950 AD second Hoover Commission brought the concept of program budget which tells that planning and program is the part of budget system.

The main objective of this budget is to achieve the goal and result by making budget program oriented. This budget was implemented in FY 2007/28. There are three element of program budget.

👉Planning (Structure)

👉Program (Analysis)

👉Budgeting (Information arrangement)

Deficit Budget:

When Expenditure exceeds the Income deficit occurs. The budget in which is presented to meet the deficit is regarded as deficit budget. Developing country used to prepare this kind of budget in order to utilize neutral resource and means of the country. This budget is largely being practiced in Nepal.

Surplus Budget:

On the contrary to deficit budget when income exceeds the expenditure. This kind of budget is generally practiced in developed country. This budget was implemented in FY 2033/34 BS in Nepal.

Balanced Budget:

This kind of budget is practiced when Income equals to expenditure (Income = Expenditure). Balanced Budget was practiced in 2009/10BS in Nepal.

Zero Based Budget:

The concept of ZBB was developed by US former president Jimmi Carter in 1977AD. The budget which is prepared without considering previous year budget as base is called as zero based budget.

Line Item Budget:

The Budget which is prepared (allotted) on the basis of individual expenditure is regarded as line item Budget. This budget also called as expense head budget. The allocated budget in Nepal for example, Salary, Allowance, Travelling allowance, furniture etc..

Historical Back Ground of Budget:

Fiscal Year (AD/BS)	Budget
1733 AD	UK first country to implement budget by UK PM Robert Walpole
2008-10-22 BS	First time implemented in Nepal by PM Matrika Pd. Koirala and Finance Minister Subham Samsher.
2009/10 BS	Balanced Budget Implementation of FY from 1st srawan to Ashad
2013/14 BS	Budget was divided into General and Development Budget.
2016/17 BS	Budget presented in Nepalese currency
2017/18 BS	Issuance of Act on National Debt
2026/27 BS	Development Budget/Program Budget
2033/34 BS	Surplus Budget
2059/60 BS	Implementation of MTEF(mid term expenditure program frame work)
2061/62 BS	Implementation of budget by dividing into Current Budget, capital Budget and principal return instead of General and Development budget

 👉The country who presents two different Budgets is India; Rail Budget and Union Budget.  

👉France is the country which present budget twice in a year.

👉Program Budget first started from America

 What special in  next budget?

Many are worried about inflation, Many are curious to know the allotment fund for their area and community, Entrepreneurs and Traders are more concerned towards Tax horizon, Employee are more curious to know about their increment .Considering these entire situation how do you think that upcoming budget will fulfill all these expectations???

Banks & Banking in Nepal

What is Bank…??

It has been believed that the word “Bank” is derived from Latin word “Bancus” which mean “Bench”. Bench where people used to seat and operate their money related works and keep the records for the same.

WOMEN BANK IN INDIA: By women for women

Women had their own expectations from the union budget. Considering overall  development about women, finance minister has announced the set up of India’s first women’s bank. There is no bank that exclusively serves women.