Kathmandu, July 26:
Governor of the Nepal Rastra Bank (NRB), Maha Prasad Adhikari, has said the monetary police released today would ease in loan expansion of banks and financial institutions.
Responding to queries of the media persons after unveiling of the monetary policy, he shared that it has been expected that the market would be vibrant after loan expansion.
Governor Adhikari mentioned that disbursement of loan would increase as the provision of capital fund arrangement of banks and financial institutions has been made flexible.
“Banks and financial institutions were unable to expand loan in lack of arrangement of capital fund despite having sufficient liquidity. Expanding loan means to increase loan disbursement. We have set a goal that 12.5 per cent of loan will be disbursed in the current fiscal year”, explained Adhikari.
It has been projected through monetary policy that broad money supply would be 12 per cent for the current fiscal year.
Similarly, he stressed that some provisions have been brought in the monetary policy to ease the construction sector which is in trouble for not getting payment from the government.
“There is a multi-faceted effects due to trouble of construction related sector and cooperative sector. There was a situation where the construction companies did not get contract after their cheques bounced, blacklisted after they did not get their payment on time”, added the Governor.
Through the Monetary Policy, the NRB has extended the period for paying the principal and interest of the loans issued to the construction entrepreneurs until December 15, 2024, a provision has been made not to put the contractors in the black list only on the basis of check bounce until another provision is made on notice of loans, a separate arrangement would be made regarding the provision on the ceiling of credit rating while utilizing the banking facilities and facilities outside the ledger among the loans.
Similarly, regarding the loans arising through claims on surety of construction entrepreneurs, provisions have been made on loan classification and maintaining the loan loss as other loans for the current fiscal year from the date the loan was created.
Governor Adhikari claimed that a flexible monetary policy has been brought in a balanced and cautious manner so that the overall economic and financial system foes not face problem. He opined that the provisions in the monetary policy alone would not be enough to put to an end the slowdown seen in the existing economy.
“It begets more risk if efforts are made to address all things only through the monetary policy. The monetary policy gives stability to the interest rate in the market and at the same time creates the environment for investment. Works should be carried out ahead synchronization among various entities and policies,” the NRB Governor asserted.
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Monetary Policy 2024/25: New policy facilitates five provisions of budget
The new Monetary Policy for current fiscal year 2024/25 has some special arrangements to implement and facilitate various five provisions in the budget of the current fiscal year.
Unveiling the new Monetary Policy here today, Governor of Nepal Rastra Bank Maha Prasad Adhikari said that new policy will ease off the process to obtain loan on mortgage of agricultural product.
Similarly, the central bank, through the new policy, has made further easier the provision of the budget to provide loan without collateral based on the assurance of the remittance from those foreign migrant works obtaining labour permit and to encourage the loan flow from the banks and financial institutions for innovation.
To address the problems existing in the cooperatives, the new policy seeks to facilitate the government for the implementation of the system of refunding the money of saver members of the cooperative upto Rs 500,000 on the security deposit on assets that is in the name of the cooperative’s proprietor or members of the same family.
Furthermore, the new policy has special provision to promote entrepreneurship as mentioned in the budget. The new policy will facilitate in providing aspiring entrepreneurs loan in easy and simple manner.
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Monetary Policy 2024/25: Rs 200 million limit on share mortgage scrapped
The maximum limit Rs 200 million set for institutional loan has been abolished.
Unveiling the Monetary Policy for the fiscal year 2024/25 here today, Governor of Nepal Rastra Bank Maha Prasad Adhikari informed about this flexibility in share mortgage loans.
The Bank, however, has not introduced any new provision as for the share mortgage to individuals. Governor Adhikari said, “At this situation when the margin trading could not be done easily and systematically, the existing maximum limit of Rs 200 million for the loan provided by banks and financial institutions to institutional investors for margin trading in share securities.”
The Monetary Policy stated that the 34 security brokerage companies have been approved to promote the concept of margin trading concept by gradually reducing the direct loan investment from the banks and financial institutions in the securities market.
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Monetary Policy encourages microfinance institutions for merger
The Nepal Rastra Bank (NRB) has unveiled a monetary policy of current fiscal year with a target of encouraging the microfinance institutions for merger.
The monetary policy has a priority of protecting clients’ interest addressing the complaints regarding service of such institution.
NRB Governor Maha Prasad Adhikari said necessary regulatory arrangements would be placed keeping the protection of clients’ interest based on international good practice in priority.
The monetary policy has made arrangement of contemporary review on regulatory arrangement related to interest rate on loan and service charge taken by microfinance institutions, as well as rescheduling the loan by paying certain percent of interest for customers who are unable to pay their loans to the microfinance institutions due to situation.
Further arrangement would be made to encourage those microfinance institutions working by limiting its scope of work in any certain province and place, reads the monetary policy.
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Monetary Policy 2024/25: Bank rate and deposit collection rate lowered
Nepal Rastra Bank (NRB) has unveiled the Monetary Policy for Fiscal Year 2024/25 today. Through this policy, the central bank of the country has slashed the bank rate and the deposit collection rate.
“The upper limit of the bank rate in the interest rate corridor has been maintained at 6.5 percent from 7 percent and the policy rate has been fixed at 5 percent from 5.5 percent,” said the NRB Governor Maha Prasad Adhikari, while unveiling the Policy.
However, the deposit collection rate that remains as the lower limit of the interest rate corridor has been kept unchanged at 3 percent. The provision of providing permanent liquidity facility in the bank rate has been continued and the conditions for making the liquidity available shall be made flexible, the NRB stated.
Similarly, the existing provision related to the compulsory cash ratio and authorized liquidity ratio that the banks and financial institutions have to retain has been continued.
Making public the Monetary Policy for Fiscal Year 2024/25, Governor Adhikari said the monetary policy has been cautiously oriented towards flexibility in order to make the economy vibrant keeping in view the ease of price and the status of external sector.
Similarly, the policy has emphasized on improving the loan flow and the quality of loans towards the productive sector. A regulatory system has been formulated to maintain fiscal stability.
Policy eases managing capital fund stress
The Monetary Policy has brought some flexible provisions for managing the pressure on bank and financial institutions’ capital fund. For this, the NRB has adopted the policy of encouraging the use of capital fund instruments and new instruments.
The provision of existing 1.20 percent credit loss that has to be made on good loan has been reduced and maintained at 1.10 percent. Similarly, the NRB stated that the provision related to the risk weightage carried out on 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 maximum 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 manner that the total capital fund is not double that of the primary capital fund.
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