Author: space4knews

May 14, Kathmandu – The Independent Power Producers’ Association Nepal (IPPAN) has implemented comprehensive reforms in its leadership selection process, addressing longstanding disputes and dissatisfaction within the organization.

The association’s 24th General Assembly and 8th Convention held on May 12 adopted a provision for open competition for all positions, including the president, starting from the upcoming term.

The convention amended the bylaws to abolish the previous system where the senior vice president automatically succeeded as president. From now on, all eligible members will directly compete for every post, including that of president.

The earlier structure, where the senior vice president automatically became president and office bearers were selected solely by the executive committee, had caused dissatisfaction among members.

Prior to the convention, leadership selection, representation, and bylaw amendments had sparked disputes. Some members raised concerns about growing influence of limited groups within the association and weakening democratic practices, demanding open competition.

On this basis, the General Assembly amended the bylaws to make leadership selection more inclusive and competitive. As per the revised rules, candidates for president must have previously served at least one term on the executive committee.

Additionally, IPPAN now prohibits candidates for president and senior vice president posts from holding membership in any political party. Those previously affiliated must provide proof of resignation from such membership. This aims to maintain the association’s independence from political influences.

The bylaw revision process had been underway for several years. At the 21st Annual General Assembly, a five-member committee led by Bhanubhakta Pokharel prepared a report proposing amendments including transforming IPPAN into a federation.

However, since the federation transformation process did not progress, IPPAN decided to proceed with the convention based on the existing bylaws.

The General Assembly also approved expanding the organization’s structure. The number of vice presidents increased from five to seven, and secretaries from five to seven. Balram Khatri and Prakashchandra Dulal were elected vice presidents, while Krishna Ghimire and Deepak Paudel were selected as secretaries. Furthermore, provisions were included to nominate five permanent invited members.

IPPAN stated that to end polarization and include all factions, two vice presidents, two secretaries, and five permanent invited members were selected unanimously.

In the recent leadership election, all posts except treasurer reached consensus, leading to the unanimous selection of the new executive committee. Treasurer candidates Shankar Basyal and Mithun Paudel competed, but Paudel left the polling station during voting. Based on the votes, Basyal was elected with 267 votes to Paudel’s 82.

Energy sector entrepreneurs described these changes as efforts to resolve internal disputes and promote cooperation and consensus within the association.

Following approval from the District Administration Office, the revised bylaws will be fully implemented. IPPAN expressed confidence that the new provisions will make the organization more democratic, inclusive, and transparent.

Reforms Following Periods of Dispute

Power producers investing billions of rupees in hydropower projects faced various challenges in the association. The organization had faced severe criticism for operational renewal delays up to 2024.

The issues affected even the General Assembly’s inauguration ceremony. Energy, Water Resources, and Irrigation Minister Biraj Bhakta Shrestha attended only after learning from the District Administration Office that the renewal had been completed until 2024.

There had been growing calls to resolve the problems both inside and outside the organization and move forward responsibly.

Opposition and warnings emerged over the association’s operation without renewal, decisions made by the General Assembly, and the mandate committee’s annulments.

Following warnings from outgoing Deputy Secretary Prakash Dulal and others, then IPPAN President Ganesh Karki issued a statement dismissing these matters as misleading and baseless.

The matter was also widely discussed at the General Assembly. Despite the long-standing disputes, the 8th Convention decided to reject the plan to transform IPPAN into a federation after amending the bylaws.

The proposal to advance IPPAN as a more effective and empowered body by transforming it into a federation has been postponed indefinitely.

May 14, Kathmandu – It has become evident that the practice of issuing new loans to repay old debts in banks and financial institutions obscures the actual scale of bad loans. Nepal Rastra Bank’s supervision process has found that banks grant new loans specifically to conceal bad debts and repay previous loans.

According to the central bank, the true extent of bad loans in commercial banks is not reflected accurately, confirmed during their supervision. The latest fiscal year supervision report states that non-performing loans stand at NPR 220.33 billion.

This amount has increased by 22.40 percent compared to fiscal year 2023/24. In fiscal year 2024/25, bad loans comprise 4.4 percent of the total loans of banks.

Field inspections by the central bank revealed that, when borrowers fail to repay old loans, banks approve new loans at the end of the quarter or fiscal month to show repayment of old loans. The main objective behind providing loans to repay loans has been to hide bad debts, the report concludes. The supervision report states, ‘The practice of extending loans to repay existing loans has concealed bad debts. The bad loan figures currently visible are not the actual numbers.’

Additionally, inspections found that some loans are being misused. The report states, ‘Loans granted for specific purposes are being diverted by borrowers to other activities, and banks have ignored such discrepancies. A majority of loan amounts were found transferred to accounts of directors or their related persons.’

Banks and financial institutions have been negligent in collateral valuation as well. Field inspections discovered some files under auction because of non-repayment were not classified as bad loans. The report also highlights weaknesses in internal auditing within banks.

The internal audit department chief is evaluated by the Chief Executive Officer (CEO), undermining the independence of the audit process, according to the central bank. Under CEO leadership, auditors cannot effectively point out errors committed by the CEO.

Furthermore, weaknesses were found in the boards of directors and senior management of banks. The central bank’s monitoring revealed non-compliance with its regulations regarding the appointment and benefits of CEOs. The supervision report notes, ‘Certain banks have provided CEOs with benefits not allowed by regulations, such as multiple security guards and domestic workers.’

The boards of directors, instead of focusing on policy-making, interfered in minor management tasks. It was also found that some meetings included over 100 agenda items with decisions made without proper discussions. Senior-level positions in banks have been vacant for over three months with lack of inclusivity.

Independent and female director appointments, mandated by official regulations, have not been made timely, according to monitoring findings.

The central bank also concluded that banks keep more CA trainees than permanent staff in audit departments, failing to conduct thorough inspections. Banks have also neglected to conduct timely security audits of software and technology.

Many banks still operate ATMs and branches using outdated and insecure software such as Windows 7. ATM cards and their PINs are kept insecurely in the same room; CCTV backups are not maintained for the required 90 days, and vault keys are not stored under dual supervision. In some cases, cash is transported by motorcycle without security guards.

Banks’ contingency plans for liquidity crises exist only on paper and have not been activated when crises arise, the central bank reported. Heavily relying on a few large institutional depositors poses a risk if they withdraw funds, potentially impacting the banks’ stability.

The rise in bad loans has increased provisioning requirements, placing significant pressure on banks’ capital. Discrepancies have been detected between reports submitted to Nepal Rastra Bank and the actual data in banks’ software. Borrowers’ PAN numbers and names have also been recorded inaccurately.

Commercial banks hold 83.87 percent of total banking sector assets and 87.09 percent of total deposits. The central bank has introduced a procedure to identify systemically important banks.

Since problems in these banks could trigger economic instability, they will face stricter regulation. The central bank also mandated that at least 10 percent of corporate social responsibility funds be spent in each province.

Preparations are underway to modernize supervision by incorporating artificial intelligence and machine learning techniques. Eliminating the problematic practice of issuing loans to repay loans remains a key challenge.

Banks have been classifying high-risk loans as low risk to maintain their capital adequacy ratios within regulatory thresholds; detecting such accounting manipulations is challenging.

The CEO also evaluates the risk management officers and internal audit chiefs, limiting their ability to work independently without pressure.

Ensuring independence from management influence remains a challenge for the central bank. Field inspections for assessing loan utilization are also challenging. The report recommends adopting technology-based modern supervision methods.