The current practice is that the central
bank uses a “one-size-fits-all” when regulating commercial banks and
community banks—leaving the latter group at a disadvantage side.
The BoT deliberations are on the IMF country report released Wednesday.
The report, quoting the authorities, said: “Work is underway to develop a supervisory framework for community banks”.
A paper, “Reengineering the financial
sector development strategy 2015” said it was improper to have a blanket
set of regulations for all banks.
The paper penned by Yetu Microfinance
Bank Managing Director, Mr Altemius Millinga, suggested that community
banks should have their own set of regulations.
“This approach is fundamental flawed,” he said.
“We recommend for a specific set of
regulations which take into account the size, operational area and
importance of the community banks.”
The Managing Director said community
banks are at a disadvantage as they are small and unable to survive
under the current regulatory system.
“Currently almost all the community banks are under stress and undercapitalised.
They shoulder increased regulatory burden because of the regulatory approach of “one-size-fits- all,” he said.
The central bank had acknowledged that
community banks are facing a number of myriad challenges arising from
high running costs of IT, auditing and finance mobilization.
However, the main challenge that
community banks face include finance mobilisation which is crucial in
the first three to five years after the establishment of banks before
pocketing the first profit.
The minimum regulatory requirement for
community banks is 2bn/-, but to effective performance, the capital
requirement should be at least 4.0bn/-, according to microfinance
experts.
Most of the CBs shareholders are
savings, cooperative and credit societies and district councils - with
limited financial muscles.
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