Kathmandu. Bank loans are becoming cheaper, but the pace of investment has not improved. The private sector has said that the policy is necessary to remove the situation of silence in the economy.
Nepal Rastra Bank (NRB) While preparing to formulate monetary policy for 83, the private sector has stressed the need to work by incorporating the economy in this policy. While commercial banks are continuously reducing deposit rates, the cost of loans is also decreasing. Due to this, the base rate of some commercial banks has come down historically. Standard Chartered Bank’s base rate has come down to 4.9 per cent and Rastriya Banijya Bank’s base rate to 4.97 per cent.
The reduction in base rate has made credit cheaper. However, despite the availability of such cheap credit, the flow of investment in the industry and market has not increased.
Stakeholders in industry, business and private sectors are now stressing the need for monetary policy to play a role in creating an environment where investors can be trusted. The weighted average interest rate on loans of commercial banks was 8.11 per cent, development banks 9.45 per cent and finance companies 10.31 per cent in April 2018. The weighted average interest rate on loans of commercial banks was 10.34 per cent, development banks 11.89 per cent and finance companies 13.11 per cent in April 2018.
Even as interest rates are falling every month, they have not been able to help expand investment. Bankers have been saying that investment has not increased due to lack of demand for credit.
Nepal Rastra Bank (NRB) is collecting suggestions to formulate monetary policy for the next fiscal year. Industrialists and businessmen of the private sector are giving suggestions in this regard. They have stressed that the next policy should be more morale and comfort than strict.
The production and sales cycle in the industry sector is currently being affected. Although there is plenty of liquidity in the bank, the economy has not been able to move due to its use in the production-oriented sector. Therefore, industrialists and businessmen insist that the current current capital loan limit should be increased from 40 percent of the annual turnover to 60 percent. They believe that this will ease the operation of the industry and help in reviving economic activities.
Similarly, they say that the evaluation of industries that have been in loss for two years due to the impact of the epidemic is now based on buccalas (losses seen in the book), so it does not look at commercial cash flow. Therefore, the private sector has suggested that the assessment should be done based on the situation of cash flow. It is expected to save the industry and also reduce the non-performing loans of banks.
According to the private sector, although the Rastra Bank has brought some easing of the policy by issuing some directives, they are limited to a few areas. They stressed the need for clear policies, access and flexibility in small and medium enterprises, start-ups, construction, agriculture and tourism.
Loans from banks and financial institutions to the private sector increased by Rs 368.68 billion (7.3 per cent) in the current fiscal year. In the same period of the previous year, such loans had increased by Rs 225.24 billion (4.7 percent). Although there has been some improvement in credit expansion in the current fiscal year compared to the previous fiscal year, it has not been able to achieve the desired pace.
In the monetary policy of the current fiscal year, it was estimated that 12.5 percent of the credit flow to the private sector would be disbursed during this period. However, by the end of the current fiscal year, the loan has not increased at the expected pace. As a result, the private sector is disappointed now.
