Nepali Congress lawmaker Rajan KC has strongly opposed a proposed provision under the Bank and Financial Institution Act (BAFIA) that aims to prevent individuals with even 1% shareholding in any bank or financial institution from taking loans from the entire banking system. He said the idea is impractical and could further slow down Nepal’s already struggling economy.
Rajan KC spoke during Finance Committee meeting
The issue was discussed during Sunday’s meeting of the Finance Committee under the House of Representatives, held at Singha Durbar. During the discussion on BAFIA amendments, Rajan KC voiced serious concerns about the impact such strict rules could have on the financial sector and the private economy.
Suggests increasing investment limit to 2%
Using examples of institutions like Citizen Life Insurance, Kumari Bank, and Prabhu Insurance, KC argued that rather than restricting people who own just 1% shares, the law should allow up to a 2% investment limit. He stressed that regulations should be supportive, not restrictive.
“BAFIA should prioritize regulation in a way that keeps the economy active. Overly strict rules can create more problems,” KC said.
Current law already restricts director loans
KC clarified that there is already a rule that stops directors from taking loans from the same bank they are involved in. However, banning them from borrowing from any bank just because they own a small portion of shares is unfair and unrealistic, he said.
“Yes, you can’t take a loan from the bank where you are a director. But banning loans from all banks just because you own 1% is not right,” KC added.
Over-regulation may harm private sector
According to KC, imposing such restrictions would demotivate private investors and business owners, especially at a time when the economy is weak. He emphasized that the government should be encouraging private sector growth, not blocking it with unnecessary regulations.
“Too many restrictions will only create more problems. The private sector should not be discouraged with rules that make no economic sense,” he warned.
Banks play a vital role in economic activity
Rajan KC concluded that banks are central to keeping the economy moving. So, lawmakers must be careful while drafting laws that affect banking and finance.
“Banks drive the economy. So, while making laws for this sector, we must keep the bigger picture in mind,” he said.
