Among the 753 local federal units of the country, nearly 300 still have no banks. People’s representatives and civil servants making district headquarters or urban areas their stations citing the absence of banks has made it difficult for people spread over more than a third of the country’s geography to access the services of local governments.
-Krishna Adhikari (Nepalgunj) /Laxmi Gautam (Panchthar)/ Basant Pratap Singh (Bajhang)/ Ananda Gautam (Taplegjung) : Centre for Investigative Journalism
“Singha Durbar in villages” has been a widely used phrase in political and administrative circles since the local level was formed in March 2016. But people’s representatives and local residents have no realization of the relocation of authority in the absence of even banks and financial institutions in the villages. Citing the absence of banks, elected representatives and government officials have opened “contact offices” in the district headquarters, instead of going to the local federal units with the services. This has compelled general people to reach the district headquarters for government services. Such problems are common in nearly 300 local federal units where no banks have been set up.
It took 12 days to open a bank account in the name of the Kaya Khola Micro Hydropower Project in Saipal Rural Municipality, Bajhang. The account is necessary for the consumer committee to get its payment for doing project works. There was no bank in the village. “We reached the district headquarters after three days of trek to get the form for opening the account. The process required the recommendation and seal of the rural municipality. We returned trekking for three days again,” said consumer committee chairman Manbahadur Bohara. “We opened the bank account after walking for three days again.” It takes between six to 12 days to deposit the amount released from the rural municipality in the consumer committee’s account. “Committee office-bearers have to set aside half-a-month only for taking out money and depositing it.”
Staffers and service seekers at the contact office of Surma Rural Municipality in the Bajhang district headquarters. Photo: Basanta Pratap Singh
The problem is not only of time, but also of cost. Bajhchauka Water Supply Consumer Committee Secretary Prem Bahadur Bohara said bank transactions have been costly due to the distance and the cumbersome process. For the water supply scheme worth Rs 1.5 million, the bank process alone had cost Rs 100,000. “Travel alone cost more than Rs 100,000 while opening the bank account, depositing the amount and withdrawing cash,” Bohara said. “Work has not been over yet.”
Since there are no banks in rural municipalities of remote areas, service seekers have the compulsion of going to the district headquarters even for minor businesses. In the process, the funds received from the local governments for small development works are used up in travel to and from the district headquarters. “Money for projects worth Rs 50,000, Rs 100,000 is spent on two-way travel,” District Coordination Committee Accountant Lal Bahadur Khati said. “In this situation, I don’t think [new] plans will be made.”
Female members of consumer committees face more trouble in the absence of banks in their localities. For instance, Ramlaxmi Thapa of the Chhabis-Pathibhara Rural Municipality in Bajhang is the treasurer of the Banna-Mellek feeder road construction committee. For financial transactions related to road construction, she has to trek for five hours to the district headquarters. She has often reached the district headquarters Chainpur by leaving her five-year-old granddaughter at home. “Once, it was 10 pm when I reached home after completing work,” said Thapa. “I’ve had to walk at night alone, domestic chores have been affected. I’ve come to regret my decision to be on the committee.”
While banks refuse to open their branches at the local level units, it has been difficult to pay teachers of remote schools. There have been instances of schools being shut while teachers go to the district headquarters to collect their salary. “It takes minimum two days to fetch salary,” said Urmila Devi Singh, a teacher at the Mahadev Primary School. “Since there will be nobody to teach while we are away, the school is closed.”
Local level at the district headquarters
Since banks have refused to open branches in rural municipalities, RMs in remote areas have set up their contact offices in places where there are banks (mostly at the district headquarters). Local government staffs have to reach banks even for small transactions. Considering it easier to have contact offices at the district headquarters than going there repeatedly, people’s representatives are stationed at their offices in the centre.
In Bajhang only Jayaprithvi Municipality, among the 12 local federal units in the district, has branches of banks. Acting Chief Administrative Officer of Bajhangmasta RM Rangalal Sarki said he had set up the contact office at the district headquarters, rather than going there for all businesses. “It was no use staying in the villages since all the staffers are here,” he said.
Travel and daily allowance paid to staffers who travel to and from the district headquarters to open bank accounts and to deposit money and for other administrative and financial works amounts to tens of thousands of rupees. “Since officials have to keep travelling, their transportation costs and daily travel allowances add up to hundreds of thousands of rupees annually,” said Gagan Aidi, acting chief administrative officer of Chhabis Pathibhara Rural Municipality. “Had there been banks in the village, the amount could have been used in development works.”
Most of the local federal units in Jumla and Mugu districts are doing their works by setting up contact offices at the district headquarters. Tila RM Vice-chairperson Maya Budha of Jumla said the chief administrative officer and accountant remain in the contact office at the district headquarters citing the lack of bank and internet in villages. “More staffers are in the contact office than the rural municipality office,” she added.
The Mugu district headquarters, Gamgadhi. Photo: Krishna Adhikari
Karmarong rural municipality in Mugu has its contact office in the district headquarters Gamgadhi. RM chairperson and most staffers stay at the headquarters as there is no bank in the area. Karmarong RM Vice-chairperson Chhiring Tamang said most people’s representatives and staffers reach the village office once a month and return after two/four days.
Soru, Mugum, Karmarong and Khatyad rural municipalities of Mugu still have no banks. Locals here have to walk for two days to a bank at the district headquarters. The decades-old trouble of having to stay overnight at the district headquarters for the banking services remains.
Local governments’ preference for banking transactions to cash deals is security of money. More important is the mandatory order from the Centre. The budget for the current fiscal year requires banking channel for distributing social security allowances and salary to teachers and civil servants.
The grants provided by the central government and revenues collected locally are deposited to the local treasury. The federal finance ministry requires local governments to open their treasury accounts in A grade commercial banks, making such institutions essential at the local level. The budget bars local governments from doing business with other financial institutions.
Moreover, the state sets Rs 1 million as the upper limit for cash deals. Cash transactions beyond the limit attract Money Laundering Prevention Act (2008), which authorizes seizing of the dealt amount and fine and imprisonment in line with the claimant value. Nepal Rastra Bank, the finance ministry and the Department of Money Laundering Investigation introduced the system at the start of the current fiscal year by publishing a notice in the Nepal Gazette. Local governments have not been true to their names due to the centre’s lack of effective roles in opening bank branches even after imposing these mandatory rules.
According to Chapter 123 (8) of the revised Public Procurement Regulations-2064, payments of money more than Rs 25,000 to suppliers, contractors, service providers and consultants have to be made through account payee cheque. This requirement makes bank accounts and transactions through the banking channel mandatory. The absence of banks at the local level has troubled people’s representatives and the general public. “It’s easier to keep accounts, maintaining cash stock has the risks of theft and loss,” Account Officer Santosh Bahadur Khadka of Thulibheri Municipality in Dolpa said. “Since there is confusion if the right claimant gets money while paying in cash, account staff find the banking channel easier as far as possible.”
No bank in municipality
Troubles faced by citizens in the absence of banks are mainly the story of rural municipalities in remote areas. Municipalities, which are more accessible, have banks but a Kalikot municipality is an exception. People of Tilagupha municipality have to reach the district headquarters Manma to avail of services provided by the local level.
Tilagupha municipality has opened its contact in Manma to deliver its services. Mayor Ratan Bahadur Shahi, chief administrative officer and other officials are stationed there. One year after formation of the local government, Tilagupha locals are compelled to reach the district headquarters even for ordinary services. “Since there is no bank in the village, we have opened the contact office in order to do people’s works with ease,” Mayor Shahi said.
Contact office of Naraharinath RM (left) and Tilagupha Municipality (right) in Kalikot district headquarters Manma. Photo: Krishna Adhikari
Naraharinath and Palauta rural municipalities of Kalikot have also put up sign boards of their contact offices in Manma. Other local federal units, even though they have not named their offices, are based at the headquarters. Among the nine local units in Kalikot, only two have banks in their territory.
Overall, among the 79 local federal units in Karnali, 56 lack banks. Service seekers have been doubly affected since their representatives and staffers are based in the district headquarters. Like in the unitary regime of the past, common people are still compelled to walk to the district headquarters even for basic services.
Social security allowances insecure
Due to the absence of banks, paying social security allowance and staff salary has been a matter of grave concern. Since cash has to be carried to villages, there is a danger of it being robbed. Shubhakalika RM Chairman Khadananda Chaulagain in Kalikot said official distributing cash brought from a bank at the district headquarters for distribution among the beneficiaries in villages has the risk of being robbed.
“Teachers’ salary and old age allowances are all distributed from the rural municipality,” said Chaulagain, adding that carrying large amounts of money unsafely in bags runs the robbery risk, and threatens the life of the carrier.
Be it Kalikot in the western hills or Panchthar in eastern hills, the situation is similar. Tumbewa RM chief Homnath Thapa in Panchthar said they were unable to serve people effectively in the absence of banks in villages. While it is unsafe to carry cash from the district headquarters, there is no alternative. “If you don’t carry cash, there are elderly people awaiting their allowances in villages. If you carry it, there is fear of being robbed,” said Thapa.
Among one municipality and seven rural municipalities in Panchthar, six RMs have no bank. Pahlelung, Hilihang, Tumbewa, Kummayak, Miklajung and Phalgunanda rural municipalities have no banks in them. People of the remote villages have to reach district headquarters Phidim or Damak of Jhapa for banking services. Consumer committee office bearer Dilandra Kumar Sherma said villagers were facing obstacles to taking forward projects agreed with rural municipalities in the absence of banks. “It took two days to open a bank account at the district headquarters for the consumer committee of a project worth Rs 55,000,” he said. “Transport fare up and down and hotel charges need the budget of a small project.”
Deceitful bank
As directed by the Nepal Rastra Bank, Mega Bank proposed opening its branch in Sirijanga Rural Municipality, Taplejung. Excited at the offer, RM Chairman Tikaram Gurung organized discussions on preparing infrastructure for the purpose. He made plans of concrete building and security arrangements for the bank. However, the bank informed us that it would not be coming. “I’m making efforts to bring a bank here, but no one seems to be ready.”
In the absence of banks, common people have not realised the presence of their local government. “The earlier system was better, when we got all the services from one place at least,” local people say. Phaktalung RM Chairman Saroj Ebheng believes banks refuse to go to villages as they will have no profits there. Among the eight rural municipalities in Taplejung, bank exists only in Mauwakhola RM. “Banks’ proposals and people’s impatience have created pressure,” said Athrai Triveni RM Chairman Bishwa Sitaula. At the district headquarters Phungling, eight banks including Nepal Bank Limited are providing service. Development banks number half a dozen. But none is ready to open a branch in villages.
Phaktanglung Rural Municipality Office centre Topethok in Taplejung. People of this RM bordering with Tibet of China are compelled to trek four days to the district headquarters Phunglung for banking services. Photo: Ananda Gautam
NBL Taplejung Branch Manager Tej Prakash Nepal said banks cannot go to villages immediately in the absence of necessary structures. Bank staffs say they cannot open branches in village until police post and motorable roads reach there.
Janata Bank Manager Jiban Adhikari said banks cannot establish branches in villages without 3G internet, all-weather road, police post and concrete buildings. Past practices, however, show they are merely excuses. “Nepal Bank existed here five years ago. It was functional,” said Dilip Shrestha, who has been working at the bank for the past four decades. “Cash has to be transferred five-six times a year. Ferrying cash poses no problem when the local security network is mobilized.” He shared the experience of Nepal Bank Limited getting porters to carry cash along the Tamor riverbank from Biratnagar during its establishment.
Profit motive
While service seekers and people’s representatives are facing hassles at the local level, banks are producing excuses not to expand their network. They argue that they can go to remote villages without infrastructure like electricity, internet, road and transport. This looks reasonable but banks’ refusal to go to rural municipalities is merely an excuse, says former governor of Nepal Rastra Bank Dipendra Bahadur Chhetri. “The main reason is their perception that there are not much financial transaction and profit in villages,” he added.
Past experiences also show Chhetri’s charge holds ground. When the country saw power cuts up to 18 hours a day, banks used diesel generators and other resources to provide services. In places inaccessible by roads, security personnel have been escorting porters who carry cash to banks. “In this age, there are alternatives to electricity. Solar panels can be used to run internet,” said economist Dipakraj Joshi, who is also the assistant chief at the Jayprithvi Multiple Campus in Bajhang. “Banks are trying to shirk responsibility by blaming [lack of] physical infrastructure.”
In remote areas, transactions of the local government amounting less than Rs 500 million in budget, pension and social security allowance and little savings of local people cannot bring much profit to banks. The main business of a bank is large amounts of daily deposit and lending. People with plenty of resources generally live in towns and cities. The main mortgage for loans is house and land, which is not widely used in villages. Besides, property in villages has little value, which cannot be readily auctioned. This is a reason why banks do not choose rural areas as their base.
Economist Joshi says, “Without big transactions, profit is not sizeable too. The sole reason for banks refusing to go to the hills is little prospect of profit.” Chiefs of district branches of banks, however, say their concern is security more than profit in villages. “Without adequate security, nobody can walk to villages for two-three days with millions of rupees,” Everest Bank Bajhang branch manager Mukunda Bhandari said. “More than electricity and internet, it’s the absence of road that keeps us from opening our branches.”
Another major cause of failure to expand the network of banks at the local level is the central bank’s silence over banks’ defiance to extend their services. According to the banking regulator, 28 commercial banks had their branches in 398 local federal units until two months ago. There were 350 branches before local governments were elected last year. The latest addition of 44 branches is in profitable local units, according to a Nepal Rastra Bank source. “[Banks] refuse to go to places where they can’t make money.”
On March 26, 2018, the NRB named banks that were to open new branches at the local level. The directives required them to set up branches in 243 local units two weeks ago while the remaining 116 political units have to get banks before the end of the current fiscal year. The central bank has warned of legal action against defiant banks but this has not affected the banking service providers.
The central bank source said banks would not face action even if they did not expand their network into rural areas. It is nearly one-and-a-half years since local level was formed and one year since the government initiated homework to expand banking services. But nearly 300 local units are still without banks. All of them are unlikely to have access to banks without major intervention from the political and administrative circles. NRB spokesperson Narayan Poudel reiterated the bank’s directive to banks to reach all the local federal units by the end of this fiscal year. “I have no statistics on their numbers,” he said.
