Kathmandu. KATHMANDU: Nepal Rastra Bank (NRB) is preparing to review the monetary policy for the first quarter of the current fiscal year. According to the provision of making the first quarter review public within 45 days of the end of the quarter, the central bank is going to make it public within a few days.
The monetary policy is flexible in the first year of Governor Bishwa Poudel’s tenure. Loans to the private sector had already started increasing when the monetary policy, which was introduced like a capsule to rejuvenate the private sector and the banks and financial sector. But the Genji agitation of September 23 and 24 put the economy back to slowdown, putting aside the flexibility of monetary policy. Since then, the private sector has not been able to ask for loans and the banking sector has accumulated more than Rs 10 trillion worth of investable money.
Industrialists and businessmen expect the central bank to play a role in overcoming the sluggishness in the private sector after the agitation. However, experts say that the central bank, which is under pressure, does not have much room to be flexible.
The private sector has complained that the government should have taken initiatives to improve the morale of the lost private sector. Industrialists and businessmen say that the central bank should be able to make the private sector dynamic through concessional business loans. At the same time, the central bank is under pressure to provide policy concessions to small entrepreneurs and businessmen to make the economy dynamic.
On the other hand, the central bank is trying to adopt flexibility in the areas where credit flow has not increased in the current situation where there is sufficient liquidity.
The central bank has been focusing on this sector as the stock market has been aggressively lending in recent times. Banks and financial institutions can lend up to 40 percent shares of the core capital as collateral. The central bank is preparing to remove this limit by modifying this provision. Also, the current provision of investing in shares for more than 6 months is also being removed, according to a source from the NRB.
In the current situation where liquidity is piling up, removing the core capital limit will ease the expansion of loans. Investors in the stock market are also happy that this policy is coming. They also believe that the impact of which is visible in the stock market.
In the first year of his term, Governor Poudel was very flexible in his monetary policy. Governor Poudel said that provisions have been made in the monetary policy that the country could take benefit when the amount of money to lend in the banking sector was increasing continuously, and the interest rate was decreasing. However, as the situation worsened, liquidity has accumulated more than Rs 11 trillion. Experts say that the monetary policy should be reviewed to break this.
Private sector credit is projected to expand by 12 percent for the next year, but now it will have to work hard to meet this target. However, the credit growth projections projected by the monetary policy for the past few years have not been meeting the reality.
On the other hand, the interest rate of deposits is continuously decreasing due to high liquidity. In the current situation of low interest rates, on the one hand, banks are reluctant to take more deposits, while on the other hand, depositors are also suffering. Savers say that the first quarterly review of the monetary policy should also address the current situation where banks are reluctant to accept deposits from both institutional and individual depositors.
Nepal Rastra Bank, Employees Provident Fund, Citizen Investment Trust, Securities Board of Nepal, Nepal Telecommunication Authority, Nepal Army, Nepal Police and other big funds have stopped taking deposits.
