Unveiling the monetary policy, NRB Governor Maha Prasad Adhikari said that the economic condition of Nepal at present is mixed.
Governor Adhikari said that based on the data of the first 11 months of the fiscal year 2080/81, inflation has been contained within the target and the external sector is robust. The interest on deposits and credit has been falling due to the presence of excess liquidity in the banking system.
In comparison to last FY, there is an improvement in the gross domestic product. But the government expenditure and revenue collection has remained lower.
Similarly, the credit outflow of banks and financial institutions has remained lower than estimated.
Through the Monetary Policy for fiscal year 2080/81, the NRB has lowered the bank rate and the deposit collection rate.
Governor Adhikari said that the upper limit of the interest rate corridor has been set at 6.5 percent from the earlier 7 percent and the policy rate has been maintained at 5 percent from 5.5 percent. The lower limit of the interest rate corridor, which is the deposit collection rate, remains unchanged at 3 percent.
Although the policy has continued the provision of the Standing Liquidity Facility (SLF) at the bank rate, it announced that the conditions for providing the SLF will be made flexible. Likewise, the existing provisions regarding the mandatory cash reserve ratio (CRR) and statutory liquidity ratio (SLR) to be maintained by the BFIs have been kept constant.
The Monetary Policy has brought some flexible provisions for managing the pressure on banks and financial institutions' capital funds. For this, the NRB has adopted the policy of encouraging the use of capital fund instruments and new instruments.
The provision of the existing 1.20 per cent credit loss that has to be made on good loans has been reduced and maintained at 1.10 per cent. Similarly, the NRB stated that the provision related to the risk weightage carried out on the purchase and sale of borrowings shall be reviewed.
It is stated that the existing limit of the Regulatory Retail Portfolio (RRP) has been increased from Rs 20 million to a maximum of Rs 25 million.
Provision has been made in which the banks and financial institutions, while calculating the 'tier-2 capital', can calculate the appropriate 'reserve amount' in the regulatory reserve as tier-2 capital, remaining under the provision of the Capital Adequacy Framework-2015, in such a manner that the total capital fund is not double that of the primary capital fund.
Similarly, NRB has removed Rs 200 million cap on margin lending provided by banks and financial institutions.
The new monetary policy outlines that the NRB has approved 34 securities brokerage companies to promote margin trading, aiming to gradually reduce the direct loan investments from banks and financial institutions in the securities market.
Moreover, the monetary policy has increased the limit of the existing foreign currency exchange facility to USD 50,000 from the previous USD 35000.
NRB has also extended the deadline for the payment of principal and interest on loans disbursed to construction entrepreneurs till Mangsir.
Adhikari said that the construction businesses will not be blacklisted only on the ground of fraudulent cheques until further arrangements regarding credit information.
