The US-based Citi Bank’s decision to discontinue all banking relations with Nepal has opened door for other international banks to expand their business in Nepal in corresponding banking.
As soon as Citi notified of its plan to exit, Nepali banks have started shifting their business to other banks involved in corresponding banking.
Nepal Investment Bank Limited (NIBL), which has 26-year long relations with the Citi, has started making payment of the Letter of Credit (LC) through other international banks such as Mashreq of UAE, Standard Chartered and JP Morgan Chase.
“Since Citi officials visited us and also wrote about discontinuing all service giving certain deadline, we have started shifting our businesses to other banks,” said Raajan Amatya, deputy general manager of NIBL.
Citi sought to cut off link with Nepal stating that its business in Nepal remained insignificant even as its cost grew while documenting information about Nepali banking to comply with the US rules and regulations.
It has informed the Nepali banks that it will completely stop doing business with Nepal after end of April.
As Citi covers a big share of Nepal’s corresponding banking business, other banks involved in the same business will benefit from the Citi’s decision.
Nepal Rastra Bank, which has asked the Citi to continue its corresponding banking with Nepal after City informed it about its exit plan, is also considering shifting its business to other banks.
“We have to opt for Standard Chartered, Mashreq or other banks to further business if Citi is determined to close its business relation with Nepal,” said a senior NRB official.
However, the central bank officials say that they are hopeful that the international bank reconsiders its decision.
Bankers, however, believe it will not have big impact on their businesses. “If City goes, others steps in,” said Anil Gnawali, chief executive officer of Nabil Bank. “City is just discontinuing its relations with reasons due to business reasons according to their letters.”
Citi’s exit has given an opportunity to other international banks to expand their corresponding banking business with Nepal. According to a source at the Mashreq Bank, LC businesses that used to go to Citi Bank has now started to come to them after the latest development.
“As we are emerging players in corresponding banking, we will seek to attract Nepali banks to us,” said the Mashreq source.
Mashreq representative for Nepal Hema Kumari Adhikari also said that they have a long-term commitment in Nepal and would seek to have more businesses from Nepali banks. Although purely a business decision on the part of Citi, NRB officials fear that it may send negative message about Nepal’s financial system.
A senior NRB official said that only the low business volume can not be the reason as it could increase the charge or minimum balance for the central bank or other Nepali banks to increase profits against operation cost. About two months ago, Citi had asked the Nepali embassy to close its account with the bank, claiming that it had to follow the strict anti-money laundering measures. (Source:ekantipur)