The governor of the Nepal Rastra Bank, Mahaprasad Adhikari, has unveiled the Monetary Policy for Nepal 2079/2080. In this article, we’ve included the full video, highlights, and summary of the Monetary Policy For Nepal 2079/80.
Watch the Monetary Policy for Nepal 2079/2080 full video here:
Monetary Policy For Nepal 2079/80 – Highlights and Summary
Here are the highlights and summary of the monetary policy for Nepal 2079/80:
- The Nepal Rastra Bank has lowered its credit target. The central bank has lowered its credit expansion target from 19% to 12.6%.
- Cash Reserve Ratio (CRR) has been increased from the current 3% to 4% and will take effect from the beginning of the Bhadra month of 2079.
- By the end of Poush 2079, commercial banks need to increase their statutory liquidity to 12%, and development banks and financial firms need to increase it to 10%.
- The Counter Cyclic Capital Buffer, which was interrupted by the Covid-19 epidemic, will be implemented after Shrawan 2080.
- Concessions and tax exemptions are only granted if banks and microfinance institutions are operating integrated businesses by the end of Poush 2079.
- Loans under 25 rupees or loans equal to 25 rupees have a risk weight of 100%, and equity loans above 25 rupees have a risk weight of 150%.
- The central bank has raised key interest rates from 7% to 8.5%. This change will improve the rate of transactions between banks. The basic interest rate is fixed at 7% and the deposit interest rate is fixed at 5.5%.
- The weighted average interest rate on interbank loans must not exceed 2% of the base interest rate of 7%.
- The existing regulations of the National Bank on the suspension of securities transactions in the event of a merger or acquisition of banks or financial institutions have been abolished. Currently, it is arranged according to the rules of the Securities Commission of Nepal.
- NRB has made general changes in share mortgage loans. The government has made general revisions to the limit of 4/12 previously fixed for share mortgage loans, and only Rs. 12 crores have been fixed. In other words, previously, if a loan of Rs. 4 crores was obtained from one organization and a maximum loan of 12 crores from the entire organization, it has been amended to provide a maximum loan of Rs. 12 Crores from one or the entire organization.
- Bonds issued by banks and financial institutions up to the end of Ashad 2080 can be counted as the source of credit deposits ratio (CD Ratio).
- According to the central bank and the suggestion made by the budget, inflation would be limited to 7 percent.
- The additional capital (capital buffer) ratio of 2 percent will be re-imposed and to be implemented from the start of Shrawan 2080. The countercyclical capital buffer (CCyB) will limit banks’ ability to lend loans. When the central bank offered a counter buffer discount in the past, banks were still maintaining a capital adequacy level of 11%. If there is no discount on the counter buffer, this ratio must be maintained at 13 percent. As a result, it appears that banks with less capital have less power to make loans.
- In the productive sector, 2 percent premium of the base rate and an additional 4 percent of base rate, interest should be charged for loans such as shares, real estate, imports etc.
- Microfinance companies can issue debentures as per their capital fund.
- Banks and financial institutions will be provided permanent liquidity facilities at the bank rate for a maximum period of 5 days on the collateral of the bonds specified by this bank, provided that the outstanding balance of the total deposits in the domestic currency of the respective institutions at the end of the previous week is not more than 1 percent.
- Lender of Last Resort Facility (LOLR) by adding a penalty rate of 2 percentage points to the bank rate for banks and financial institutions that are unable to manage the required liquidity through the interbank market, daily liquidity facility, open market transactions, and permanent liquidity facility, if requested by that institution. will be provided. Procedures related to last creditor facilities will be issued.
- It will be arranged that the enterprise businesses that have availed a loan of up to Rs. 5 crore from banks and financial institutions will not be charged penal interest if they pay the loan principal and interest by the end of Ashoj 2079.
- When disbursing loans to the private sector for the construction of information technology and industrial parks, an arrangement will be made to determine the interest rate by adding a maximum of 2 percentage points to the base rate.
- Banks and financial institutions have mortgaged houses/land for unopened purposes for new loans, mortgage loans, property loans, and personal periodic loans, and the ratio between the fair market value of the loan and the mortgage security shall be 30 percent maximum within Kathmandu Valley and 40 percent maximum in other places.
- Keeping in view the pressure on prices and foreign exchange reserves, the rates under the interest rate corridor have been increased by 15 percentage points for macroeconomic stability and the bank rate has been maintained at 8.5 percent, the policy rate at 70 percent, and the deposit collection rate at 5.5 percent.
- Keeping in mind the necessity of maintaining foreign exchange reserves at a convenient level for a country like Nepal with a small and import-based open economy, the goal of monetary policy will be to help achieve the targeted economic growth without putting pressure on prices from the demand side while maintaining foreign exchange reserves that can support the import of goods and services for up to 7 months.
Monetary Policy For Nepal 2079/80 PDF – Free Download
You can download the monetary policy for Nepal 2079/80 PDF from here: