Early Monday morning, Nepal Oil Corporation (NOC) hurriedly deposited checks collected from various dealers worth Rs 1.4 billion at Standard Chartered Bank and asked it to immediately convert them into cash. The state-owned petroleum company was in a rush as the deadline of May 23 to pay its fortnightly installment to Indian Oil Corporation (IOC) for consignments of petroleum products was approaching.
“We knew the deadline was just two days away and it was creating pressure on us. Yet we decided to wait till the last hour to carry out the task as it was our assumption that it would only take couple of hours to cash checks,” a senior official of NOC told Republica on condition of anonymity.
But that was where NOC´s assumption went wrong. The reason: Monday was not a normal day like NOC had presumed, as it was the second consecutive day of three-day banda called by the Nepal Federation of Indigenous Nationalities.
To make the banda effective, protest organizers had asked various banks to keep their offices shut and show solidarity to their program. As a result, many banks were not open or partially open on Monday.
“Since nothing was operating in a normal way, we informed banks that we would not be delivering any service related to settlement of check payment on Monday,” a senior official of Nepal Clearing House Limited said, informing that Nepal Rastra Bank, the central monetary authority, had given consent to its decision.
This basically meant that checks of various banks, say, Nabil and Rastriya Banijya, that were issued by NOC´s dealers could not be cashed and deposited at its account in Standard Chartered.
Later, the panicking fuel monopolist even reached the doors of the Ministry of Finance to help it get the checks cleared. But it was told to wait until Tuesday when the clearing house resumes normal operation.
The clearing house works as an intermediary between two banks to settle check payments. Simply put, it indirectly helps, say, Standard Chartered client, who has received payment via check issued by, say, Nabil Bank, to have the amount deposited in Standard Chartered within two to five and half hours, without making the client go to Nabil Bank.
That´s why check payments cannot be processed without the help of the clearing house.
Although NOC is quite sure about meeting the IOC´s deadline as it will still have one more day to settle the payment if it is able to have its check cashed on Tuesday, the oil corporation´s experience shows how the banda has affected day to day work of firms that have to rely on financial institutions to conduct business.
The shutdown has had similar impact on individuals who want to access banking services like depositing money or obtaining a bank draft. The protest has also forced those going abroad to scuttle places to convert foreign currency, while closure of ATM kiosks in many places has also affected those who are in need of cash.
In Pokhara, for instance, many depositors who are in urgent need of money have started calling bankers to arrange the funds they need. Although many banks in the western city have opened back doors for their clients, many call it a risky proposition as protesters are “violent this time”.
“These institutions which were allowed to provide services unhindered during the Maoist insurgency and people´s movement of 2006 now cannot risk calling their staff to work as protesters prevent them from entering workplaces,” Bishwa Mohan Adhikari, CEO of City Development Bank, said, calling the situation “tragic”.
This has not only affected deposit collection and loan distribution but has also affected loan recovery process, which is of utmost importance to ensure sound financial health of banks and financial institutions.
Although there are no official figures on losses these daily bandas are inflicting on banks and financial institutions, Rajan Singh Bhandari, CEO of Citizens Bank and vice president of Nepal Bankers´ Association, said when every wheel of economy has been forcefully clogged, banks will definitely be in the losing end as they need support of other sectors for their growth.
“When industries and firms are being told to shut down their business operations how will they pay the loan amount and approach us for fresh credit,” Singh wondered. “And when there is low demand for the money that we collect from depositors, we obviously cannot generate profit.”
Source myrepublica
“We knew the deadline was just two days away and it was creating pressure on us. Yet we decided to wait till the last hour to carry out the task as it was our assumption that it would only take couple of hours to cash checks,” a senior official of NOC told Republica on condition of anonymity.
But that was where NOC´s assumption went wrong. The reason: Monday was not a normal day like NOC had presumed, as it was the second consecutive day of three-day banda called by the Nepal Federation of Indigenous Nationalities.
To make the banda effective, protest organizers had asked various banks to keep their offices shut and show solidarity to their program. As a result, many banks were not open or partially open on Monday.
“Since nothing was operating in a normal way, we informed banks that we would not be delivering any service related to settlement of check payment on Monday,” a senior official of Nepal Clearing House Limited said, informing that Nepal Rastra Bank, the central monetary authority, had given consent to its decision.
This basically meant that checks of various banks, say, Nabil and Rastriya Banijya, that were issued by NOC´s dealers could not be cashed and deposited at its account in Standard Chartered.
Later, the panicking fuel monopolist even reached the doors of the Ministry of Finance to help it get the checks cleared. But it was told to wait until Tuesday when the clearing house resumes normal operation.
The clearing house works as an intermediary between two banks to settle check payments. Simply put, it indirectly helps, say, Standard Chartered client, who has received payment via check issued by, say, Nabil Bank, to have the amount deposited in Standard Chartered within two to five and half hours, without making the client go to Nabil Bank.
That´s why check payments cannot be processed without the help of the clearing house.
Although NOC is quite sure about meeting the IOC´s deadline as it will still have one more day to settle the payment if it is able to have its check cashed on Tuesday, the oil corporation´s experience shows how the banda has affected day to day work of firms that have to rely on financial institutions to conduct business.
The shutdown has had similar impact on individuals who want to access banking services like depositing money or obtaining a bank draft. The protest has also forced those going abroad to scuttle places to convert foreign currency, while closure of ATM kiosks in many places has also affected those who are in need of cash.
In Pokhara, for instance, many depositors who are in urgent need of money have started calling bankers to arrange the funds they need. Although many banks in the western city have opened back doors for their clients, many call it a risky proposition as protesters are “violent this time”.
“These institutions which were allowed to provide services unhindered during the Maoist insurgency and people´s movement of 2006 now cannot risk calling their staff to work as protesters prevent them from entering workplaces,” Bishwa Mohan Adhikari, CEO of City Development Bank, said, calling the situation “tragic”.
This has not only affected deposit collection and loan distribution but has also affected loan recovery process, which is of utmost importance to ensure sound financial health of banks and financial institutions.
Although there are no official figures on losses these daily bandas are inflicting on banks and financial institutions, Rajan Singh Bhandari, CEO of Citizens Bank and vice president of Nepal Bankers´ Association, said when every wheel of economy has been forcefully clogged, banks will definitely be in the losing end as they need support of other sectors for their growth.
“When industries and firms are being told to shut down their business operations how will they pay the loan amount and approach us for fresh credit,” Singh wondered. “And when there is low demand for the money that we collect from depositors, we obviously cannot generate profit.”
Source myrepublica
