Ministry of Finance (MoF) and Ministry of Labor and Foreign Employment (MoLE) are at loggerheads over the formation of 'labor bank' proposed by the erstwhile Sushil Koirala-led government.

 

The dispute between the two ministries has not only delayed formation of the bank, but has also made establishment of such separate financial institution uncertain.

 

While the MoLE is for opening labor bank, MoF is against the idea. The differences of two ministries over formation of the new bank came to fore during a discussion organized by International Relations and Labor Committee of parliament on Monday.

 

Nepal Rastra Bank (NRB) is against the idea of opening labor bank.

 

"The plan to establish a bank dedicated to domestic laborers as well as those who have gone into foreign employment is based on recommendations made by two separate taskforces which have studied formation of such bank in Bangladesh and Japan. It was introduced in the policy and program of the government unveiled by former President Ram Baran Yadav," Minister for Labor and Foreign Employment Deepak Bohara said in the discussion.

 

The government had announced to open a separate financial institution for migrant workers in the common minimum program unveiled by Koirala-led government in Fiscal Year 2014/15. The institution is expected to mobilize deposits of workers, provide shares to them and offer easy and affordable financing options to migrant workers and their families.

 

"The formation of labor bank will help to mobilize remittance as well as end the financial exploitation being faced by workers who are compelled to take loans on exorbitant interest rates to finance their foreign employment process," he added.

 

However, Surya Prasad Acharya, joint secretary at MoF, told the parliamentary panel that the government should not open any bank at a time when it was preparing to offload its stake in other government-owned banks. "Financial Sector Development Strategy lays out plan to gradually divest government shares in public banks. The central bank is also preparing to reduce the number of banks. Formation of bank and financial institutions falls under the jurisdiction of NRB which has announced moratorium on issuing license for last five years," said Acharya, who also heads the Financial Sector Management Division at the finance ministry.

 

Interestingly, NRB Governor Chiranjibi Nepal, who had earlier recommended formation of the bank after conducting study in Bangladesh in the capacity of Economic Advisor to the then Prime Minister Sushil Koirala, opposed formation of the bank. "There were separate laws earlier to govern various banks which posed regulatory challenge. Thus the umbrella act BAFIA, 2006 came into effect. Introducing any bank through separate law again will create similar challenge," he added.

 

Meanwhile, MoF and NRB have proposed formation of a 'labor investment trust' to mobilize remittances and provide financial service to the aspiring migrant workers. "Setting up a labor investment trust will address welfare issues of laborers as well as provide financial services to them," said joint secretary Subedi.

 

Members of the parliamentary committee also demanded immediate formation of an institution that provides financial service to the migrant workers. "Banks have their own regulatory principles. Setting up an investment trust for laborers like Citizens Investment Trust is a good idea," Sunil Bahadur Thapa, a member of the panel, said.

 

Following differences between the two ministries regarding formation of the labor bank, the parliamentary panel has instructed MoLE to submit a 'concrete concept' within 15 days after holding consultation with NRB and MoF.