NRB un­veils mon­e­tary pol­icy, aims to re­duce in­ter­est rate

People's Review - - FRONT PAGE - By Our Re­porter

The Nepal Ras­tra Bank (NRB) has in­tro­duced its Mon­e­tary Pol­icy of the Fis­cal Year 2018/19, slash­ing the spread rate from 5 per cent to 4.5 per cent in an at­tempt to give re­lief to the pri­vate sec­tor in­vestors. This move will con­trib­ute to slightly re­duc­ing prof­its on the part of the banks and fi­nan­cial in­sti­tu­tions (BFIs), but will en­sure mul­ti­ple re­source bases for them. It will also cre­ate ad­di­tional liq­uid­ity in the bank­ing sys­tem. Five per cent spread means the banks could charge up to 17 per cent in­ter­est in loans against 12 per cent in de­posit mo­bil­i­sa­tion. Pri­vate sec­tor in­vestors have been se­ri­ously im­pacted by the ever grow­ing in­ter­est rates in the past cou­ple of years as the banks kept on hik­ing the in­ter­est rate since they had to pay up to 12 per cent in­ter­est to the de­posits as the bank­ing in­dus­try was go­ing through pro­longed liq­uid­ity cri­sis. Busi­ness com­mu­nity has wel­comed the move. To equip the BFIs to with­stand the liq­uid­ity cri­sis, the cen­tral bank has set a new ceil­ing for the Cash Re­serve Ra­tio (CRR) at 4 per cent for all BFIs—from 6 per cent for the com­mer­cial banks, 5 per cent for de­vel­op­ment banks and 4 per cent for finance com­pa­nies. This sin­gle pro­vi­sion will gen­er­ate ad­di­tional Rs. 48 bil­lion ru­pees liq­uid­ity in the bank­ing sys­tem. Like­wise, the Statu­tory Liq­uid­ity Ra­tio (SLR) is re­duced from 12 per cent to 10 per cent for com­mer­cial banks, 9 to 8 per cent for de­vel­op­ment banks and 8 to 7 per cent for mi­cro­fi­nance com­pa­nies. The NRB has cut down the limit of mar­gin lend­ing from 40 per cent to 25 per cent which means the banks now can mo­bilise the loan against the col­lat­eral of shares should not cross 25 per cent of the paid up cap­i­tal of the re­spec­tive BFI. But the over­all size of mar­gin lend­ing won't come down as the paid up cap­i­tal of the com­mer­cial banks have been in­creased to Rs. 8 bil­lion each from Rs. 2 bil­lion each. In the mon­e­tary pol­icy, the cen­tral bank has adopted a merger pol­icy for the class ‘D' mi­cro­fi­nance in­sti­tu­tions (MFIs). The cen­tral bank has al­lowed the com­mer­cial banks and MFIs to ac­cept loan, 25 per cent of their paid up cap­i­tal or Rs. 2 bil­lion each as of now, in con­vert­ible for­eign cur­rency and In­dian cur­rency from for­eign banks.

It has re­de­fined the de­prived sec­tor lend­ing and made a blan­ket pro­vi­sion for all BFIs in­stead of the ex­ist­ing 5 per cent of to­tal lend­ing of com­mer­cial bank, 4.5 per cent of de­vel­op­ment bank and 4 per cent of finance com­pa­nies. It has come hard on the over­draft and other re­volv­ing in­di­vid­ual loans and cut down the limit of such loans by Rs. 2.5 mil­lion, from Rs. 7.5 mil­lion to Rs. 5 mil­lion.

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