Nepali banks without paper notes
Nepal Rastra Bank, state bank of Nepal, is facing paper notes crises these days. The demand of notes and especially new notes is always high during Dashain festival and so as this year. However, the crisis of paper notes mainly denomination of 500 and 1000 was existing for months earlier. Earlier, it was thought that the government would check bank accounts of big depositors so they took out their money and stored on their own. As soon as they feel secure, the notes came into market. Again, there is a problem. It could be due to several things. But I could visualize following three issues for this problem.
1. Government policies.
2. Number of financial institutions.
3. Dirty financial crises politics
1. Government policies
As stated earlier, the government forms and changes financial policies frequently. When government issue a policy to check big depositors, tax on bank deposits, full records on deposit or withdrawal of more than 100 thousands rupees etc. These policies has made people insure to save money in bank. Hence they are taking out their money which has created notes crisis in the market.
2. Number of financial institutions
The number of banks and other financial institutions are increasing rapidly in Nepal. Due to high competition, they are also opening number of branches. For example, there are: Class A Commercial banks: 26; Class B Development banks: 63; Class C Finance companies: 77; Class D Micro credit development banks: 15; and around 10 thousands savings and cooperatives involved in financial activities. The state bank could not meet the notes demand also due to the large number of banks and financial organizations and their 'any time money' (ATM) machines. Most of the banks and finances are introducing number of ATMs. Charging or distributing the cash in ATMs of thousands of financial organizations must have contributed for notes problem in the market.
3. Dirty financial crises politics
The businessman are playing a big role in state's financial policies. There are some big business houses who also run big financial institutions like banks. Whenever they feel insecure in financial policies or when policies are not according to their interest, they create crisis without notice. This situation could be the same. Another reason might be due to ex-ruling party, who recently step down from government, artificially creating the problem. They may have told the business community about the next political move and dramatize the situation with different changes. That might have put them in pressure to keep the cash in their own instead of keeping in bank.
The problem can be partially solved with market trading through cheques and using electronic card for marketing as far as possible. Even the government can request the public to cooperate in the situation by lowering the cash transaction or maximizing electronic transaction. The state bank also needs research on the routes of notes and their whereabouts so that the problem can be solved in short period in future.
1. Government policies.
2. Number of financial institutions.
3. Dirty financial crises politics
1. Government policies
As stated earlier, the government forms and changes financial policies frequently. When government issue a policy to check big depositors, tax on bank deposits, full records on deposit or withdrawal of more than 100 thousands rupees etc. These policies has made people insure to save money in bank. Hence they are taking out their money which has created notes crisis in the market.
2. Number of financial institutions
The number of banks and other financial institutions are increasing rapidly in Nepal. Due to high competition, they are also opening number of branches. For example, there are: Class A Commercial banks: 26; Class B Development banks: 63; Class C Finance companies: 77; Class D Micro credit development banks: 15; and around 10 thousands savings and cooperatives involved in financial activities. The state bank could not meet the notes demand also due to the large number of banks and financial organizations and their 'any time money' (ATM) machines. Most of the banks and finances are introducing number of ATMs. Charging or distributing the cash in ATMs of thousands of financial organizations must have contributed for notes problem in the market.
3. Dirty financial crises politics
The businessman are playing a big role in state's financial policies. There are some big business houses who also run big financial institutions like banks. Whenever they feel insecure in financial policies or when policies are not according to their interest, they create crisis without notice. This situation could be the same. Another reason might be due to ex-ruling party, who recently step down from government, artificially creating the problem. They may have told the business community about the next political move and dramatize the situation with different changes. That might have put them in pressure to keep the cash in their own instead of keeping in bank.
The problem can be partially solved with market trading through cheques and using electronic card for marketing as far as possible. Even the government can request the public to cooperate in the situation by lowering the cash transaction or maximizing electronic transaction. The state bank also needs research on the routes of notes and their whereabouts so that the problem can be solved in short period in future.
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