NEA, EPF sign Rs 10 billion-loan agreement for Upper Tamakoshi

Nepal Electricity Authority (NEA) on behalf of Upper Tamakoshi Hydropower Company today signed a loan agreement with Employees Provident Fund (EPF). NEA Executive Director and Chairman of Tamakoshi Hydropower Company Ltd Dr Jeevendra Jha and EPF Chief Administrator Ramesh Kumar Bhattarai signed the Rs 10-billion loan agreement to fund the 456-MW hydro power project.

The other lenders Nepal Telecom (NT), Rastriya Beema Sansthan (RBS), and Citizen Investment Trust (CIT) are planning to sign the lending agreement soon. Apart from EFF's Rs 10 billion, NT is lending Rs 6 billion, RBS and CIT Rs 2 billion each, and the government is lending Rs 11.8 billion to the hydro power project.

NT, CIT and RBS are also the shareholders in the ambitious hydro power project billed as the cheapest hydro power project. NEA has, on behalf of Upper Tamakoshi Hydropower Company Ltd, signed an agreement with NT, CIT and RBS to share 30 per cent of the total cost of the project on Monday as promoters.

According to the revised equity structure, NEA will have 40 per cent, NT six per cent, RBS and CIT two per cent each, depositors of Employees Provident Fund (EPF) 18 per cent, locals of Dolakha district 10 per cet, general public 15 per cent, employees of Tamakoshi Hydroproject and NEA four per cent and the employees of the lending agencies will get three per cent shares.

In view of new regulations from the Securities Board of Nepal (Sebon), the company has revised the equity structure. The new regulation says that a hydro power company must float at least 15 per cent shares to public.

Meanwhile, the NT board of directors held a meeting yesterday and nominated its managing director Amar Nath Singh on the board of Upper Tamakoshi Hydropower Company.

The 456-MW Upper Tamakoshi hydro power project will cost Rs 35.29 billion, if it is completed on time, that is, by 2014-15.

Bankers oppose salary ceiling

The bankers showed their serious concern over the central bank's move to fix the perks and benefits of the chief executive officers (CEOs), directors and other high-ranking staffers.
"The central bank's move to make the perks and benefits transparent is weclome," told Sashin Joshi, president of Nepal Bankers Association (NBA) and CEO of NIC Bank here today talking to scribes. "But to fix it is not practical," he said adding that banking is one of the most competitive sectors in Nepal at present. "Such move might start brain-drain in banking sector," Joshi added.
The Monetary Policy for the fiscal year 2010-11 -- announced yesterday by Nepal Rastra Bank (NRB) -- has hinted at controlling perks and benefits of chief executive officers (CEOs), directors and other high-ranking staffers to make it compatible with economic condition of the country.
"Pays and perks should be tied up with performance," suggested Rajan Singh Bhandari, vice-president of NBA and CEO of Citizens Bank Nepal.
The bankers were also concerned over the central bank's interference in the open market. "Reading between the lines, it seems the central bank also wants to control rates," they said adding that the market decides the rates, not the central bank. However, the bankers have themselves, recently, formed a 'gentlemen-agreement' on rates. Though, they claimed that the 'gentlemen-agreement' was not to let the rates go over the board.
The bankers think that increasing the Statutory Liquidity ration (SLR) after adding money at bank's vault is positive move but NRB's indication to dictate rates and fees is not according to the free market economic policy that Nepal is towing.
"The Policy has also failed to clarify how it's going to encourage Merger and Acquisition (M&A), though its a welcome move," Joshi said adding that the tax policy and labour law need to be clear to encourage the M&A. "Similarly, deposit insurance is a good move but it might send wrong message."
The bankers also called the central bank not to discourge Interbank deposits and bring the foreign institutional investors in the capital market, apart from strict regulation on credit cooperatives.
The central bank has apart from Early Warning Signal (EWS) to further strengthen the banks and financial institutions brought -- for the first time -- stress testing, which would predict the impact of economic ups and down in the financial system.
The domestic banks carry high credit and liquidity risks, according to International Monetary Fund (IMF). "Some banks are even facing high solvency risk," the IMF added.
The formal announcement of the Monetary Policy has a very short history of less than a decade in Nepal. But it used to be announced after the budget to support the fiscal policy. This time, it has been announced before the budget and is broadly based on Three Year Interim Plan (2010-2013).

Monetary Policy fails to boost investors' morale

The much-waited monetary policy launched here today could not boost the confidence of the investors leave alone the bankers.

"Due to dwindeling exports and rising bank interest rates, we had high hopes from the monetary policy," said Kush Kumar Joshi, president of Federation of Nepalese Chambers of Commerce and Industry (FNCCI). "But the policy that was brought without waiting for the full-fledged budget to give a quick fix to the economic distortions has failed to lift the morale of the investors," he said adding that the entrepreneurs are now waiting for the budget to come for their rescue. They were hoping for the bank rates to go down, though the policy has brought down the refinancing rate to seven per cent from 7.5 per cent.

Nepal Bankers Association (NBA) president Sashin Joshi also echoed similar concern. "Controlling price hike is a challenge without complimentary fiscal policy," he added.

The 'cautious' Monetary Policy for the fiscal year 2010-11 that has based broadly on Three Year Interim Plan (2010-2013) has projected the inflation rate at seven per cent, GDP growth rate at 5.5 per cent, broad money supply at 15 per cent, Balance of Payment (BoP) at Rs 9 billion surplus and forex reserve that could be enough for six months goods and services import.

It has, as expected, relaxed the lending on housing, margin loan against the shares, import of gold and silver. But it has put 10 per cent cap on realty sector lending. "Those financial institutions that have already lent more should bring it under 10 per cent within two years," the policy stated.
Last year's Monetary policy had also targetted seven per cent inflation,which could not be met. Similarly, the growth rate that was pegged at 5.5 also could not be achieved as it remained at 3.5. The BoP was targetted at Rs 18 billion surplus, but by the 11 months of 2009-10, it is Rs 15 billion deficit.

However, this year's policy has tried to ease the Indian Currency supply. "NRB can permit financial institutions that have licence to transact in Indian Currency to open Nostro Account in Indian banks," said central bank governor Dr Yubraj Khatiwada launching the Monetary Policy.

However, it has revived the old rule of taking permission to open the bank branches. "The policy of taking permission from NRB to open new branches is regressive," NBA president said adding, "but moratorium on new bank licence is a welcome move."

Though, the Policy has stopped the licence for new banks, it is still in favour of huge infrastructure banks and upgradation of financial institutions. "However, upgradation will not only be based on paid up capital as was the practice till now," Khatiwada said. The policy has planned 'stress-test' to strengthen the financial institutions. "They also have to prepare contingency plan," it said.

The policy has not changed repo and reserve repo duration and cash reserve ratio (CRR) that is at 5.5 per cent for last two year. However, it has revised the Statutory Liquidity Ratio (SLR) upwards to maintain financial stability and liquidity. The commercial banks have to maintain 15 per cent, development banks 11 per cent, finance companies 10 per cent and D class micro-credit institutions that can mobilise deposits have to maintain four per cent SLR. However, the SLF and the cash in vault can also be calculated in the SLR, said the policy.

Policy Target

Inflation rate -- seven per cent

GDP growth rate -- 5.5 per cent

Broad money supply -- 15 per cent

Balance of Payment -- at Rs 9 billion surplus

Connectivity key to Nepal's development: ADB Chief

The Asian Development Bank (ADB) thinks connectivity within and outside Nepal can transform Nepal into a developed country.
"The connectivity will help Nepal reap regional benefit,' ADB president Haruhiko Kuroda said here today, wrapping up his four-day Nepal visit. "Without better connectivity and infrastructure, the country cannot move ahead."

He assured of the ADB's continuous and strong support to Nepal as it undertakes efforts to overcome economic challenges amid political transition, that he thinks is one of the challenges Nepal is facing currently.

Kuroda said the country has made significant gains in poverty reduction and several key human development indicators over the past decade, despite a lengthy civil conflict coupled with challenging topography and landlocked geography.

"The effects of the global economic crisis and gaps in infrastructure development and institution building have to be addressed," he said adding that he was confident Nepal can overcome all the challenges.

"I strongly believe that Nepal has the potential to transform the current challenges into opportunities by staying the course on economic reforms, and ensuring equitable and inclusive growth by focusing on progressive social and human development," Kuroda added.

To help the government carry out its development programmes, ADB is more than doubling its country assistance to Nepal from $258 million in 2007-2008 to $559 million for 2009-2010, and is targeting about $287 million annually from 2011 to 2013.

"Our assistance includes a grant component of 50 per cent and will allow Nepal to focus on priority capacity building and social reforms," Kuroda said.

During his visit, Kuroda made field trips to various ADB-assisted projects in Lumbini and the surrounding areas, and met with the projects’ beneficiaries. He also visited the South Asia Tourism Infrastructure Development project, where ADB is supporting development and improvement of infrastructure and services in Lumbini, Skills for Employment project in Marchawar, which supports delivery of market-oriented, short-term training, particularly to women and the disadvantaged, to help them attain better wage and employment prospects.

Kuroda also inspected the Bhairawa-Bhumai road that was constructed under the ADB-assisted Subregional Transport Facilitation Project.

ADB’s development assistance commitment towards Nepal is laid down in its Country Partnership Strategy 2010-2012, which aims to promote inclusive economic growth, along with social development, governance improvements, climate change adaptation, and environmental sustainability. To achieve these broad-based goals, it is focusing its operations in six priority areas, agriculture and natural resources, education, energy, finance, transport, and municipal infrastructure and services.

Since ADB first started assisting Nepal in 1969, it has provided nearly $3 billion in concessional loans and grants for investment projects, and about $138 million in technical assistance grants.

IMF not to pull out of Nepal 'completely'

Alexander Pitt, resident representative of International Monetary Fund (IMF) is going to be the last resident representative of IMF for Nepal after his term expires on October 31.

"My term as IMF resident representative in Nepal will end on October 31," he said adding that after that the IMF will maintain a locally staffed office in the Nepal Rastra Bank but the IMF’s resident representative in New Delhi will oversee the Nepal operations.

Issuing a press note here today, Pitt said that the decision was made in the context of the Fund’s reorientation towards a more regional focus, its efforts to strengthen surveillance with an increased focus on multilateral aspects, and budgetary considerations.

"I would like to stress that this decision is completely unrelated to the current political or economic situation in Nepal, and will have no impact on the IMF’s relations with Nepal and on the work that we do on the country," he tried to assure.

In particular, this will not adversely affect ongoing discussions with the government and NRB on a possible Fund-supported programme and a mission will visit to Nepal in September.

Ministry suggests airports upgradation

Ministry of Tourism and Civil Aviation (MoTCA) has suggested the government to upgrade Tribhuwan International Airport (TIA) and Gautam Buddha Airport in Bhairahawa including Janakpur and Pokhara Airports within this year.

"Since the country is celebrating the year 2011 as Nepal Tourism Year 2011, we have to upgrade some of the airports, where there is over flow of the tourists," said Birendra Kumar Singh, joint secretary at the ministry.

"Upgradation of these airports at the regional level can also help airlines to fly to neighbouring countries bordering cities," he said adding that it would help achieve the target of one million tourists in the year 2011.

"If the government facilitates the airliners to fly in the country -- by upgrading the airports -- and out of the country -- with proper Air Service Agreements (ASA), the national campaign of NTY-2011 could be successful," he added.

According to the new bi-lateral ASA singed between Kathmandu and New Delhi, the earlier 6,000 seats per week has been expanded to one way 30,000 seats per week linking New Delhi, Mumbai, Chennai, Kolkata, Hyderabad and Bangalore, the ministry said adding that with the new agreement now five times more air seats will give a boost to the Indian tourists arrivals.

"With the spirit of the SAARC Charter, Nepal has received the facility to operate air services with unlimited seats to 21points -- Ahmadabad, Amritsar, Aurangabad, Bhubaneswar, Kalikot, Cochin, Gaya, Goa, Guwahati, Jayapur, Khajrao, Lucknow, Patna, Portblaire, Tiruwananthapuram, Tiruchilapalli, Banaras, Bishhakapatna and three more points to Bagdogra, Deharadun and Gorakhpur," it added. "Nepal also gets the facility to operate any of the destination in the SAARC region from these points with unlimited seat by the designated airlines."

Earlier, Nepal used to operate air services to seven points of India but now it is expanded to 27 points that according to the ministry will definately help propel Indian tourist flow.

Meanwhile, the government has also started construction of second International Airport at Dumberbaba Nijgad, Bara. It has entered into an agreement with a Korean Company Land Mark World Wide (LMW) that has already started an extensive feasibility study.

Currently two-dozen international airlines fly to Nepal, whereas the ministry has issued 79 licences for the operation of airlines, flying schools, and an aircraft engineering and spare-parts. Among them six are single engine aircraft operators and nine are for sports and entertainment, which are based in Pokhara except one in Kathmandu.

Out of the 12 domestic airlines operators, currently eight are operational as Necon Air, Cosmic Air, Air Nepal and Unity Air are out of business.

Does NRB inflation data reflect real price hike

From rice to oil, vegetables, and fruits to cigarette in the market has become more expensive in last one year. The consumers are suffering from spiralling price hike since last couple of years. But the central bank has presented an 'unbelievable' data of price hike that has modertated to 9.7 per cent in the first eleven month of the fiscal year 2009-10.

"The year on year (y-o-y) inflation as measured by the consumer price index (CPI) moderated to 9.6 per cent in mid-June compared to 12.3 per cent increase in the same period a fiscal year ago," said the central bank.

However, the economists think that the consumer price index that measures the inflation itself needs revision.

Consumer price index reflects changes in the cost of acquiring a fixed basket of goods and services. The current CPI of the central bank has a basket of 301 goods and services. The prices of these are collected from the fixed market centres to calculate the CPI.

"The CPI must be revised," said Prof Dr Bishwambher Pyakurel. "Though the number of market centres and products have been increased lately, its not sufficient to reflect the real market price," he said. "Due to huge informal trade, the central bank data could also not reflect the real market and seems unbelievable."

The data is also under suspicion as it has no relation to the wholesale price index of India, from where Nepal imports in huge amount. "If there is an increase of 10 per cent in Indian wholesale price index, Nepal's CPI has to rise by 4.3 per cent and vise-versa," said Dr Pyakurel. "However, the price in the domestic market has seen increasing when the India wholesale Index was around zero also."

Another economist Dr Chiranjivi Nepal suspects the validity of the data. "The datas could be manipulated too," he said adding that the consumers are bearing the burnt of continued price hike and the central bank is producing the 'unbelieveble' data.

The central bank is the sole authority to produces economic indicators like inflation. "The central bank's CPI was developed in 1996," Dr Nepal said adding that the market has been expanded a lot since then. "The central bank must revise its system, otherwise it will lose its credibility."

Upper Tamakoshi gets share holders

Nepal Electricity Authority (NEA) on behalf of Upper Tamakoshi Hydropower Company Ltd today signed an agreement with Nepal Telecom (NT), Citizen Investment Trust (CIT) and Rastriya Beema Sansthan (RBS) to share 30 per cent of the total cost of the project.

Of the total project cost, the remaining 70 per cent will be loan.

According to the current equity structure, NEA will have 41 per cent, NT six per cent, RBS and CIT two per cent each, depositors of Employees Provident Fund (EPF) 20 per cent, locals of Dolakha district and public 10 per cent each, employees of Tamakoshi Hydroproject and NEA six per cent and the employees of the lending agencies will get three per cent shares.

However, the equity structure will be changed as according to Securities Board of Nepal’s (Sebon) new regulation, a hydropower company must float atleast 15 per cent shares to public.

“We have started consultation with the regulatory authority of capital market Sebon on the equity structure of the public,” said managing director of the Hydropower company Bhojraj Regmi. “Within a week, we will reach loan agreement with lending agencies.” The EPF, NT, RBS and CIT are lending the 456-MW hydroproject except being involved as a shareholders.

The EPF is lending Rs 6 billion, NT is lending Rs 6 billion, RBS and CIT Rs 2 billion each and the government is lending Rs 11.8 billion to the indeginous hydropower project.

“We are happy to be a part of mega project that is being constructed with domestic capital and technology,” said NT managing director Amar Nath Singh speaking on the occasion.

CIT executive director Rishiram Gautam said that the funding in hydro project is a part of CIT’s diversification in lending.

“Most of the CIT’s funds are with banks and financial institutions,” he said adding that this opportunity has provided the CIT to diversify its funds.

The 456-MW Upper Tamakoshi hydropower project is said to be cheapest hydro project as its estimated cost comes to Rs 35.29 billion, if it is completed on time. “On time completion of the project is a must,” RBS administrator Binod Aryal said adding that otherwise the project cost will go up making the cheapest hydropower project expensive. The project is also estimated to be completed by 2014-15.

NEA executive director and chairman of the Tamakoshi Hydropower Company Ltd Dr Jeevendra Jha asked the EPF, NT, RBS, and CIT to sign the lending agreement at the earliest to expedite the hydro project.

According to the NEA, Tamakoshi Hydropower Project will contribute to 66 per cent of the total installed capacity of the nations power projects and 73 per cent of the total energy that NEA has currently.

BoP deficit eases to Rs 15.07 billion, remittance Rs 211.17 billion

The Balance of Payment (BoP) deficit recorded after 25 years eased to Rs 15.07 billion in the first 11 months of 2009-10 from 10 months' Rs 17.36 billion, according to the central bank. "It was at a surplus of Rs 39.06 billion in the same period last year," it said.

"The current account also posted a deficit of Rs 34.59 billion against a surplus of Rs 39.58 billion in the same period a fiscal year ago," the central bank's report said adding that "Despite a huge current account deficit, a rise in the capital account surplus coupled with an inflow of huge trade credit liabilities largely contributed to bring down the BoP deficit."

The workers' remittances grew by 11.8 per cent to Rs 211.17 billion compared with a significant growth of 51 per cent in the sme period of the 2008-09.

Similarly, the exports plunged to less than seven times to Rs 55.37 billion as the imports posted a whopping growth to Rs 342.99 billion. "Nepal had exported worth Rs 61.40 billion and imported worth Rs 253.60 billion in the same period a fiscal ago.

However, the gross foreign exchange reserve improved a little to Rs 247.42 billion in mid-June 2010 from a level of Rs 235.75 billion in mid-April, according to the NRB that saw its reserves improving gradually to Rs 196.84 billion in mid-June 2010 from the level of Rs 182.84 billion in mid-April 2010.

The gross foreign exchange reserves in dollar terms however dropped further to $3.32 billion in mid-June from a level of $3.33 billion in mid-April. NRB attributed the fall to depreciation of Nepali currency against the US dollar. "Based on the trend of import in the eleven months of the current fiscal year, the current level of reserves is sufficient for financing merchandise imports of 8.1 months and merchandise and service imports of 6.8 months," it said.

Similarly, the government budget deficit on cash basis stood at Rs 6.69 billion compared with a surplus of Rs 1.67 billion in the same period of 2008-09. "The total government spending has however increased by 29.1 per cent to Rs 188.65 billion compared with an increase of 24.6 per cent in the same period of the previous year due to a high growth in recurrent as well as capital expenditure."

Though the price index of food and beverages group increased by 11.3 per cent and non-food and services group rose only by 7.3 per cent, the year on year inflation as measured by the consumer price index moderated to 9.6 per cent in mid-June compared with 12.3 per cent increase in the same period a year ago.

Similarly, the liquid assets of the commercial banks stood at Rs 178.5 billion in mid-June. "Of the components of liquid assets, liquid fund declined by 8.2 per cent due to a decline in commercial banks' balance with NRB as well as balance held abroad," the report said.

On account of the higher credit disbursement relative to deposit mobilisation, the credit-deposit ratio increased to 89 per cent in mid-June 2010 from 81.2 per cent in mid-July 2009. "Similarly, the liquidity-deposit ratio declined to 30.6 per cent in mid-June from 34.2 per cent in mid-July 2009," the central bank said adding that deposits mobilisation of commercial banks increased by 6.3 per cent (Rs 34.6 billion) amounting to Rs 584.4 billion in mid-June.

Forex earnings drop

Foreign exchange earnings have dropped by 0.34 per cent to Rs 16.76 billion during the first eight months of 2009-10. Compared with the preceding year, foreign exchange earnings in the first eight months of 2009-10 was less than half. Foreign exchange earnings in 2008-09 had increased by 49.9 per cent to Rs 27.96 billion, compared with a year ago, according to the Economic Survey.
Asians topped the chart of tourists visitng Nepal at 56 per cent, the annual report of the government said adding that "Out of the total tourists arrivals during the calendar year 2008, eight per cent were from North America, 1.3 per cent from Central and South America, 27.7 per cent from Western Europe, 2.5 per cent from Eastern Europe, 0.2 per cent from Africa and 18.4 per cent from India, 3.5 per cent from Australia and Pacific Region, and 37.6 per cent from other countries."
The number of tourists visiting from the Central and South America, Eastern Europe and Africa has decreased while their number has increased from other parts of the world.
Similarly, the number of hotels and hotel beds in 2008 shows that the number of star-hotels reached to 97, while the number of non-star hotels has been 647 with the addition of 74 non-star hotels. "The number of hotel beds in hotels other than star-hotels increased by 2,381 reaching to 19,124 while beds in the star-hotel have reached 9,369 with additional 49 beds compared to a year ago.
The data reveals that the number of mountaineering teams has also increased by 73 to 235 by mid-March 2009. The number of mountaineers has reached to 1,519 with 510 more climbers. "The government collected a royalty of Rs 252.5 million, that was Rs 35.426 million a fiscal year ago," the report added.

ADB president to visit Nepal as resident mission marks 20 years of operations

Asian Development Bank (ADB) President Haruhiko Kuroda is to visit Nepal from 26th to 29th July 2010, with the trip coinciding with the 20th anniversary of the establishment of ADB's resident mission in the country.
During the visit―which will be his first to Nepal as ADB President―Mr. Kuroda is scheduled to meet senior government officials to discuss ADB's ongoing assistance, and to reaffirm continued support for the country’s development objectives. He will also make field trips to ADB-assisted projects and meet with the projects’ beneficiaries.
Following the establishment of the Nepal Resident Mission, ADB has significantly increased its assistance to Nepal, with the amount set to double in 2009-2010 to $559 million, from $258 million in 2007-2008.Since ADB first began extending assistance to Nepal in 1969 it has provided nearly $3 billion in concessional loans and grants for investment projects, and about $138 million in technical assistance grants. The major sectors that receive support include agriculture and natural resources, education, finance, governance, water supply, sanitation and urban development, transport and communications.

ADB help to improve public transport in Valley

The Asian Development Bank (ADB) will provide a maximum of $20 million to help improve the urban transport system and help reduce congestion and pollution in the capital.

The ADB board of directors has approved a $10 million loan and a grant of up to $10 million, both from ADB’s Special Funds resources, for the Kathmandu Sustainable Urban Transport Project, said the Manila-based bank.

Among the key improvements envisaged under the project are the reorganisation plan of the public transport network system in Kathmandu and the introduction of two pilot bus routes financed through the government-managed Town Development Fund. The fund will also promote the usage of electric or low-emission vehicles and help reduce pollution on the roads of Kathmandu.

Making heritage routes pedestrian-only and improvement of facilities, especially sidewalks, is another important component of the project and will make Kathmandu city-center more pedestrian-friendly. Traffic management works and measures, such as junctions’ improvement and monitoring, will help solve congestion on a short term.

"Any effort to improve the urban transport system in Kathmandu must be led by the public sector, and in the case of public transport the Department of Transport Management(DoTM)," the multilateral donor said.

"ADB is pleased to work closely with DoTM on this project, which will also include support to DoTM to build up knowledge and skills in urban transport management and strengthen organisational effectiveness,” said David Margonsztern, Urban Development Specialist in ADB’s South Asia Department.

As Nepal moves into a new phase of reconciliation and rebuilding following a decade-long conflict, one challenge it needs to address is constraints in the urban transport system in Kathmandu.

Population growth, rapid urbanisation, and the increasing number of vehicles have led to traffic congestion, road accidents, environmental degradation, and poor public transport operation and services.

"Through this project, we hope to provide the city with a more efficient and sustainable urban transport system that will support economic expansion, help address climate change, and mitigate air pollution,” added Sultan H Rahman, director general of ADB’s South Asia Department.

The ADB loan will have a 32-year term, including a grace period of eight years, an annual interest charge of one per cent during the grace period and 1.5 per cent thereafter. The government will contribute $7.90 million to complete project funding.

Mega bank starts operation from Friday

(NRB) issued operating license to Mega Bank Nepal Ltd’s on Tuesday giving it a permission to operate as the 28th commercial bank of the country.

"The bank is starting its operations from Friday," said CEO of the youngest commercial bank Anil Shah.

"After a journey of over two-and-a-half-years, with the commencement of operations of Mega Bank Nepal Ltd tomorrow, the aspirations of 1,219 promoters spread over 63 districts across the country to establish a national level 'Class A' commercial Bank will be realised," he said adding that Mega Bank will be a pioneer not only in wealth creation but wealth distribution, whereby the revenue generated will flow not only to large international and national investors, but to normal people across the nation.

"The promoters of the Bank are not limited to a single foreign institution or a few large urban investors," according to Shah. "Mega Bank's promoters are spread from the most rural of districts to urban centers right across the nation with mainly from middle class and Rs 1 million to Rs 10 million investment," according to the bank that claims to be the example of economic inclusion (arthik samavesita).

"The bank reflects a new economic model in which a normal Nepali can come together and become promoter of a large scale national institutions, like Mega Bank," Shah added. "This new economic model is not only viable, but the preferred path for sustainable economic development."

"With an authorised capital of Rs 4 billion and paid up capital of Rs 2.33 billion, Mega Bank is the largest capitalised bank in the nation," said the bank's chairman Professor Dr Madan Dahal. "This impressive capital base is just the foundation -- a solid one -- on which we plan to build one of the nation’s premier financial institutions by constantly creating mutually beneficial relationships with all its stakeholders -- customers, shareholders, regulators, communities and the Mega Team," he added.

"For the Mega team, our true strength will be measured not only by analysing our profitability or strong and sustainable banking base, but also our much larger and treasured relationship base with all strata of the society," Shah said.

Mega Bank aspires to be the ‘Bankers of every Nepali from Plough to Power – Halo to Hydro’, by working and living be a set of Mega Values of being service centric, transformational, action oriented, result focused, and synergistic, or in other words being STARS to deliver the full array of five star financial services to all their customers.

The bank has the main branch and corporate office at Mega Mahal, Kantipath and is planning to open 10 branches in the first year and 50 branches over the next five years.

INSET

List of other commercial banks

1 Nepal Bank Ltd

2 Rastriya Banijya Bank
3 Nabil Bank Ltd

4 Nepal Investment Bank Ltd

5 Standard Chartered Bank

6 Himalayan Bank Ltd

7 Nepal SBI Bank Ltd

8 Nepal Bangladesh Bank Ltd

9 Everest Bank Ltd

10 Bank of Kathmandu Ltd

11 NCC Bank Ltd

12 Lumbini Bank Ltd

13 NIC Bank Ltd

14 Machhapuchhre Bank Ltd

15 Kumari Bank Ltd

16 Laxmi Bank Ltd

17 Siddhartha Bank Ltd

18 Agriculture Development Bank Ltd

19 Global Bank Ltd

20 Citizens Bank International

21 Prime Commercial Bank Ltd

22 Bank of Asia Nepal Ltd

23 Sunrise Bank Ltd

24 Development Credit Bank Ltd
25 NMB Bank Ltd

26 Kist Bank Ltd

27 Janata Bank Nepal Ltd

28 Mega Bank Nepal Ltd

ADB upgrades forecast for South Asia

The Asian Development Bank (ADB) has upgraded its economic forecast for developing Asia after first-quarter data showed broad-based growth driven by buoyant exports, strong private demand, and sustained stimulus policy effects.

In a special assessment of the region released today, ADB said it now expects South Asian aggregate growth of 7.5 per cent, slightly higher than the April projection of 7.4 per cent.India’s growth projection is unchanged at 8.2 per cent.

Similarly, developing Asia is to grow by an aggregate 7.9 per cent in 2010, up from the 7.5 per cent predicted in its Asian Development Outlook (ADO) 2010 published in April. ADB warns downside risks in the second half of the year including uncertain global environment, unpredictable private domestic demand, and the risks of dramatic capital flows andexchange rate fluctuations. As such, the growth outlook for 2011 is kept unchanged at 7.3 per cent.

Developing Asia comprises 45 member countries of ADB and covers Central Asia, East Asia, South Asia, Southeast Asia and the Pacific.

“The stronger-than-anticipated export rebound and much-improved consumer confidence have helped the region’s economies recover faster than we expected. We are seeing the newly industrialised and Southeast Asian economies leading the way,” said Jong-Wha Lee, ADB’s chief economist.

ADB forecasts East Asia to expand by 8.4 per cent, slightly higher than the 8.3 per cent predicted earlier this year.

Higher investment has helped the latter three economies, as production and consumer spending have started picking up and exports are recovering strongly.

The economic forecast for PRC is maintained at 9.6 per cent. Recent measures to slow credit growth and cool speculation in the property market will likely lead to slower investment in the coming quarters. Industrial output and the purchasing managers’ indexes also suggest a soft landing for the Chinese economy.

Aggregate growth in Southeast Asia is now expected to be 6.7 per cent this year, sharply higher than the previous projection of 5.1 per cent. First-quarter growth in the five bigger economies in this region (Indonesia, Malaysia, Philippines, Singapore and Thailand) exceeded expectations on account of strong exports, robust industrial production, and improved consumer confidence. The subgroup is projected to post 6.8 per cent growth this year.

Improving global conditions as well as higher oil prices have helped the economies in Central Asia so far in 2010. ADB now sees the region’s economy growing at an aggregate 4.8 per cent, up slightly from the ADO’s forecast of 4.7 per cent.

The forecast for growth in the Pacific island economies now stands at 3.8 per cent, versus 3.7 per cent forecast in April. However, performances vary across economies with weakness in some being balanced by resilience elsewhere.

ADB publishes its Asian Development Outlook for developing Asia in March or April and updates those forecasts in the Asian Development Outlook Update in September. It publishes the Asia Economic Monitor, a study of the 14 economies of emerging East Asia in July and December. The Asia Economic Monitor was also released today.

Revenue collection exceeds target

The government exceeded its revenue collection target by Rs 3.40 billion -- or two per cent -- as it registered Rs 179.90 billion collection. In the budget for the fiscal year 2009-10, the government had targetted to collect Rs 176.5 billion revenue.
"However, revenue collection could cross Rs 180 billion as we still have to receive the revenue data from one branch of Rastriya Banijya Bank (RBB) and four branches of Nepal Bank Ltd (NBL)," said revenue secretary Krishnahari Baskota.
"The collection is 25.5 per cent higher than in 2008-09," he said adding that the collection is record in itself. The revenue collection in the fiscal year 2008-09 stood at Rs 143.47 billion.
Encouraged by the robust growth in the first quarter of the fiscal year, the government has -- in its mid-term budgetary evaluation -- revised the revenue collection target upwards to Rs 190 billion. But in the later months, the growth rate of revenue collection has not seen consistence increase making the revised target impossible.
Baskota accepted that the revised target could not be met due to various reasons. "However, the collection is encouraging," he added.
The Value Added Tax (VAT) has contributed the highest in the total collection. "VAT contributes 32 per cent at Rs 56.75 billion in the total collection," he said adding that the second largest contributor is customs as it contributed 19 per cent at Rs 35 billion.
The income tax comes as the third largest contributor as it contributes Rs 33.75 billion, followed by excise duty that contributes Rs 24.25 billion to the national coffer.
Despite successful revenue mobilisation, entrepreneurs blame the government for being revenue-centric. "The import-based revenue has taken a toll on our export competitiveness," the entrepreneurs said adding that the whopping trade imbalance has not only pulled the Balance of Payment (BoP) to deficit, but also hurt the domestic industries. "In last 25 years, the country has never seen BoP deficit," said economist Dr Chiranjivi Nepal. "But this time, the country has seen a whopping BoP deficit of around Rs 18 billion," he said adding that the government has concentrated on revenue mobilisation instead of strengthening the export competitiveness of the local industries. "In the long-run, the domestic industries will be closed and the country will be dependent on imports," Dr Nepal added.
Though Baskota hailed the efforts of the customs officials and various policies -- like plugging the leakages -- the finance ministry has adopted to increase revenue, he also accepted that the revenue is import-based.
Since past a few years, the revenue collection has seen a consistent growth due to an increasing consumption of consumer goods.

Target vrs Collection
2006-07 -- Rs 85.37 billion -- Rs 87.71 billion
2007-08 -- Rs 103.66 billion -- Rs 107.62 billion
2008-09 -- Rs 141.72 billion -- Rs 143.47 billion
2009-10 -- Rs 176.50 billion -- Rs 179.90 billion

Foreign aid commitment hits record high

Nepal received almost double to around Rs 100 billion foreign aid commitment in the last fiscal year compared with 2008-09.

At a time when the government's absorption capacity is under doubt, the country received Rs 92,288.48 million foreign aid commitment -- including loan and grants from bilateral and multilateral agencies -- in the fiscal year 2009-10, whereas it was Rs 47,975.23 million a fiscal year ago, according to the Foreign Aid Department at the Finance Ministry (MoF).

"Though, it can not be compared, the foreign aid commitment is huge," said Lal Shanker Ghimire, chief of Foreign Aid Department at the Finance Ministry.

However, the experts are seriously concerned over Nepal's capacity to utilise the aid. "Nepal has been unable to utilise foreign aid in the past few years," said former member of the National Planning Commission (NPC) Dr Posh Raj Pandey.

Out of the total commitment, Rs 25,823.24 is loan from multilateral agencies -- World Bank (Rs 13,492.33 million) and ADB (Rs 12,330.91 million), whereas the remaining Rs 66,465.24 million is grant. "Nepal needs to develop absorbing capacity for the maximum utilisation of the aid," he added.

"For the maximum utilisation, foreign aid has to be utilised on the projects Nepal owns," he said adding that this commitment could help government plan resources for the new fiscal year.

However, the foreign aid commitment in the fiscal year 2008-09 has registered a dismal growth of 2.5 per cent compared with 32.9 per cent in its immediate preceding year.

In monetary term, committed foreign aid was limited to Rs 47,975.3 million in 2008-09 from Rs 49,186.2 million in 2007-08. "Of the total foreign aid commitment for 2008-09, bilateral assistance constituted Rs 27,196.5 million, whereas the multilateral assistance totaled to Rs 20,778.8 million," according to the MoF.

Similarly, bilateral assistance constitutes Rs 36,001.41 million, whereas multilateral assistance constitutes Rs 56,287.07 million in the fiscal year 2009-10.

While classifying the foreign aid into grant and loan components for the year, grants amounted to Rs 43,095.7 million and loans to Rs 4,879.5 million in 2008-09. Foreign grants have increased by 4.9 per cent whereas loans have decreased by 39.9 per cent compared with a fiscal year ago.

Foreign loan has been playing vital role in the Nepali economy. The net outstanding foreign loan totaled Rs 249,965.4 million in the fiscal year 2007-08, which further increased by 10.8 per cent reaching Rs 277,040.4 million in 2008-09.

The budget for the fiscal year 2009-10 has targetted Rs 78.51 billion in foreign assistance -- including grant and loan. It was 27.45 per cent of the total budget of Rs 285.93 billion.

Last budget's target

Total budget -- Rs 285.93 billion

Foreign assistance -- Rs 78.51 billion

Foreign grant -- Rs 56.95 billion

Foreign loan -- Rs 21.56 billion

Will the Monetary Policy be effective?

The central bank is preparing to bring the Monetary Policy -- for the first time before the fiscal policy popularly known as budget -- to plug in the loop holes of the economy.

However, the experts doubt the effectiveness of the Monetary Policy as it could not support the full-fledged budget that might come in two months. "Given the size of the 'Special Budget' that is Rs 110.21 billion, the actual budget size could be expansionay to be at around Rs 335 billion," said Prof Dr Bishworbher Pyakurel.

"It calls for expansionary Monetary Policy to support growth and credit flow," he said adding that 'Otherwise, it could not absorbe the macro-economic shock.

But the bankers think that the expansionary policy could create more trouble. "We need tight Monetray Policy that could support banks and financial instuitution," said Radhesh Pant, former president of Nepal Bankers' Association (NBA).

Though, expansionary Monetary Policy could pull the interest down and increase money supply, it would be ineffective currently in an absence of good investment-climate that could only be ensured by the budget and its policies.

This is the first time the central bank is bringing the Monetary Policy before budget despite its bad experience of last Policy's failure.

The ex ante stance of monetary policy of 2008-09 was made tight in the face of arising trend of prices. "It was made tight considering rising pressures on prices of goods and services, liquidity overhang of a year ago, rising asset prices and likely adverse impacts of volatility in asset prices-the prices of real estate and shares in economic activities and banking sector stability in the long run," the central bank had said then.

But it could neither contain the price hike nor eased pressure on liquidity rather the banks and financail institutions have faced liquidity crunch. "The liquidity of the commercial banks has gone down by 5.1 per cent in the first 11 months," a central bank authority said.

As last fiscal year's Monetary Policy failed to create microeconomic stability and crack whip on price hike that has posted a double digit growth despite the Policy's target to contain within seven per cent, the central bank has to analyse the tools it has used.

One of the major objectives of Nepal Rastra Bank (NRB) is to maintain stability by adopting suitable monetary policy. However, it failed in not only raising public confidence on banking and financial system, but also to provide excellent services by promoting monetary and financial system stability and ensuring a financial sector for achieving sustainable economic growth.

Another key objective of the Monetary Policy is also to facilitate economic growth through price and external sector stability. The Balance of Payment -- that registered a deficit in last 25 years -- is another challenge for the Policy.

Daily transaction amount drops to half

Nepal Stock Exchange Ltd (Nepse) registered a fall in daily transaction amount by almost half in the fiscal year (FY) 2009-10 from a fiscal year ago.

"Nepse saw Rs 42.4 million worth transaction daily in 2009-10, whereas a fiscal year ago, it used to transact Rs 92.6 million daily," according to the data.

Similarly, Nepse posted Rs 11.75 billion worth transaction during 2009-10 that is 45.80 per cent of the total transaction amount in 2008-09," the secondary market said adding that it had registered Rs 21.68 billion worth transaction during 2008-09.

The Nepse attributed its poor performance to various economic and non economic factors. "However, the over supply of shares, gloomy economic situation of the country and political uncertainty also pulled the Nepse down in 2009-10," it added.

The market capitalisation that was at Rs 5.12 trillion at the end of 2008-09 also plummeted to Rs 3.76 trillion at the end of 2009-10. "But the current market capitalisation is almost 28.59 per cent equal to the gross domestic product (GDP).

The Nepse data reveals that in 2009-10, Nepse listed 18 more companies for the secondary market transaction. "Among 18 companies, Nepse listed 11 development banks, two finance companies, two commercial banks, one hydropower and two insurance companies for the transaction in 2009-10," it said adding that the total listed companies now reach 176 companies that was only 159 a fiscal year ago.

"Two listed companies Narayani Finance and National Finance merged to form a company," according to the Nepse that has also listed Rs 19.92 billion worth ordinary shares including primary, rights, and bonus shares, Rs 227.7 million worth corporate debentures and Rs 9.80 billion worth government bonds.

However, the increasing number of securities -- in the secondary market -- coupled by low investors' confidence pulled the Nepse down to 477.73 points from a fiscal year ago's 749.10 points.

Though the secondary market has signed an agreement with CDSL India to establish the CDS, it failed to establish it within the targtted time frame. The budget for the fisca lyear 2009-10 has aimed to establish the CDS -- the scripless securities trading system -- within October.

"Nepse signed an agreement on January 15 with CDSL India for the establishment of the CDS system," according to the Nepse. Managing director of Nepse Shanker Man Singh and acting director of CDSL India P S Reddy signed the agreement on behalf of their respective organisations on January 15.

The Kathmandu-centric secondary market expanded to Biratnagar, Birgunj, Narayangath and Butwal in 2009-10, though the transaction outside the valley is not yet very encouraging. The Nepse still has many challenges like boosting the investors' confidence, making the OTC market functional, starting the bond trade, listing of more manufacturing industries to reduce the dominance of financial sector and increasing the number of brokers.

Pandey presents Special Budget

Once again the political agenda has pushed the development and economic agenda to the back burner. Instead of the full fledged budget, finance minister of the caretaker government Surendra Pandey today presented Rs 110.21 billion 'special budget' meant only for the government expenditure.
"Due to the present political deadlock, the caretaker government could not present the regular budget for the fiscal year 2010-11," he said adding that "due to the emergence of special situation, the Special Budget Bill -- that empowers government to withdraw money from Consolidated Fund to carry out regular services and activities in the coming fiscal year under the Article 96 (a) of the Interim Constitution -- has been presented.
According to him, the revised total expenditure of this fiscal year 2009-10 is estimated to remainat Rs 265.63 billion -- 20.93 per cent higher compared with a fiscal year ago. The 'special budget' will help the government to spend 'not exceeding one-third of the last year's budget'. "The government is forced to bring the 'special budget' as a temporary arrangement to allow itself to carry on with routine expenses and revenue collections in the new financial year, starting from July 17," he said.
Economic policies of the last budget gets continuity until a full-fledged budget is brought by the new government.
It is the second time after the Constituent Assembly (CA) election that the government has failed to present a full-fledged budget on time and made temporary arrangements. Under the Interim Constitution, Pandey has not announced any new tax policies as a caretaker government cannot bring changes to the present tax structure or introduce new taxes. Earlier, former finance minister Dr Ram Sharan Mahat had brought such 'special budget' in July 2008. But the entrepreneurs think that such 'temporary arrangements' will hurt the development activities and investors' sentiments. "We are on 'wait and watch' mood," said president of Federation of Nepalese Chambers of Commerce and Industry (FNCCI) Kush Kumar Joshi. "There will be no new investment as the investors will wait for the new government's programme and policy," he said adding that such arrangements will also not address the business fraternities' problems. Binod Chaudhary, CA member and the president of Confederation of Nepalese Industries (CNI) agreed, "Once again the political agenda has pushed the economic agenda to the back burner." "At a time when all the economic indicators are nosediving, expenditures are going up in an uncontrolled manner hurting the economy," he said adding that many Acts that could boost the investors' confidence are gathering dust in the Parliament. Another CA member and industrialist Rajendra Khetan thinks that neither had the full-fledged budget nor this arrangement could propel development activities. "However, had the budget come on time, it could have addressed rising trade deficit and negative Balance of Payment (BoP) position," he said adding that the arrangement is only for the government expenses. Instead of outlining new development programmes and plans, the 'advance budget' aims to enable the government function till the full-fledged budget is brought by the new government to be formed.

The next finance minister will have a daunting task to tame inflation; check intimidation and threat against business community, create investor-friendly environment, provide security for the investment, and push the plummeting exports up to bridge the widening trade gap and BoP position.

Government fails to crack the whip on rising prices

The government has failed to crack the whip on price rise. "The inflation is expected to remain at around 10.7 per cent instead of the budget's projection at seven per cent," according to the Economic Survey that Finance Minister of the caretaker government Surendra Pandey today tabled in Parliament.
"Similarly, the gross domestic product (GDP) growth has been revised to 3.5 per cent from an estimated 5.5 per cent due to low agriculture yield that was at four per cent in 2008-09," said the survey that has estimated the agriculture sector's growth to remain at 1.2 per cent. The agriculture sector contributes 33.03 per cent to the GDP, according to the pre-budget economic survey.
The survey said construction, commercial services like real estate, leasing and other services, manufacturing, and hotels and restaurants sectors could grow at higher pace than in the last financial year.
The survey has accepted government intervention as the key to address obstacles in accelerating economic growth.
"Government finance situation is satisfactory," said the survey that has estimated revenue mobilisation to grow by 24.6 per cent. Encouraged by the revenue mobilisation, the government has also revised the revenue target upwards to Rs 190 billion from the budgetary estimate of Rs 176.73 billion.
Pandey had presented an accommodative budget of Rs 285.93 billion for 2009-10, with Rs 46.34 billion deficit.
Normally, the Economic Survey is tabled in Parliament a day before the General Budget but due to political deadlock, the Finance Minister will present a Special Budget tomorrow.
He will present an estimation of expenditures and revenue projections, with no changes in tax rates or new policy measures for four months.
The Special Budget will help the government to spend 'not exceeding one-third of the last year's budget'. The government is forced to bring the Special Budget as a temporary arrangement to allow itself to carry on with routine expenses and revenue collections in the new financial year, starting from July 17. Economic policies of the last budget gets continuity until a full-fledged budget is brought by the new government.
It will be the second time after the Constituent Assembly (CA) election that the government has failed to present a full-fledged budget.
Earlier, former finance minister Dr Ram Sharan Mahat had brought such Special Budget in July 2008.
The next finance minister will have a daunting task to tame inflation; check intimidation and threat against business community, create investor-friendly environment, provide security for the investment, and push the plummeting exports up to bridge the widening trade gap.

Sector wise contribution to GDP (2009-10)
Agriculture and Forestry – 33.03 per cent
Wholesale and Retail Trade – 13.97 per cent
Transport, Storage and Communication – 9.76 per cent
Real Estate, renting and business activities -- 8.26 per cent
Education – 6.67 per cent
Construction – 6.64 per cent
Manufacturing – 6.25 per cent
Financial Intermediaries – 4.07 per cent
Hotels and Restaurants – 1.67 per cent
Public Administration and Defence – 1.99 per cent
Electricity, Gas and Water – 1.49 per cent
Health and Social Work – 1.46 per cent

Govt expenditure on PE employees goes up

Despite the poor performnace of the Public Entreprises (PEs) compared to private sector, the government's average expenditure on PEs employees has gone up almost to the level of private sector employees.
"The average expenditure per employee per month has increased to Rs 27,110 compared with Rs 21,672 a fiscal year ago," said the annual performance review of the PEs published by the Finance Ministry today.
Among the 36 PEs half of the PEs reported profit and the remaining half were in loss in the fiscal year 2008-09, whereas 17 were in profit and 19 in loss during the fiscal year 2007-08, said it.
"PEs under industrial sectors, service sector and social sector are in loss whereas the PEs under the trading sector, public utility sector and financial sector are in profit," according to the performance appraisal.
According to the Financial Comptroller General Office, the government has invested Rs 86.13 billion in these 36 PEs and has received Rs 3.47 billion in dividends in 2008-09. However, the return stands at only 4.03 per cent in comparison to the total government's share investment.
The government has received Rs 3.47 billion in dividends from Nepal Industrial District Management, Nepal Telecom, Nepal Stock Exchange and Rastriya Beema .
The review reveals that overall net profit of the PEs has also more than doubled to Rs 10.55 billion in the fiscal year 2008-09 from Rs 4.94 billion in the fiscal year 2007-08.
The performance appraisal gives a gloomy picture of the auditing of the PEs. "Out of 36 PEs, only 14 have completed audit up to fiscal year 2007-08, 15 PEs have completed audit upto 2006-07, two PEs have completed up to fiscal year 2004-05," according to it.
The government accepts that the task of limiting of number of Board of Directors to five could not be complied because of lack of Act and Regulations as some of the PEs that have specified the number of Board of Directors fixed above five that remained to be amended. Similarly, the government has also failed to hire professional management team to run the PEs.
The unfunded liability has increased by a whopping 92.59 per cent to Rs 9.54 billion in the fiscal year 2008-09, whereas contingent liability has touched Rs 17.10 billion. Similarly, the outstanding balance of the PEs remained Rs 74.6 billion at the end of the fiscal year 2008-09.
The annual performance review of the PEs incorporated per formance of 74 entreprises comprising 36 PEs with full government holding, 26 witgh minority share, 11 development committees involved in commercial activities and Employees Provident Fund that is incorporated under special Act.

Monetary Policy to give breather to margin lending, real estate

The central bank is planning to bring a balanced Monetary Policy with some changes -- especially to relax margin lending and real estate sectors -- before the full-fledged budget this time.

"The government''s policy and programmes will largely based on the Three Year Interim Plan (2011-2013) that is the already-approved," Nepal Rastra Bank (NRB) governor Dr Yubraj Khatiwada said adding that the approved-TYIP and the central bank''s financial indicators will help chalk out the plan for the Monetary Policy.

"The central bank might not need to wait for the full-fledged budget," he added. "Though, the Monetary Policy has to come after the budget – that has been delayed this year too due to political uncertainty this year – there might be exception this time."
Though, the tradition has it that the Monetary Policy is brought to support the government's policy document that is budget.

Meanwhile, painting rosy picture of the economy, the governor said that the deposit -- that was registering negative growth during February, March and April -- has been increasing by 11 per cent recently, credit to deposit (CD) ration has come down to around 85 per cent from 95 per cent and foreign exchange reserve – mainly Indian Currency (IC) and dollar – along with the Balance of Payment (BoP) is improving. "Within six months BoP will come out of the current deficit position,” he estimated.

However, he accepted that the BoP situation is not improving due to increase in exports – that has plummeted by over six times than the imports – but due to some restrictions in imports.

"Restriction on imports of some goods and services helped the BoP deficit to ease,” the governor said. The BoP deficit has eased to Rs 17.36 billion in the first ten months from Rs 22.1 billion in nine months.

The Monetary Policy will also spell out specific upgradation policy for the banks and financial institutions. "The upgradation has been stopped for a while," Khatiwada said adding that quality has to be taken seriously while upgrading banks and financial institutions.

Currently couple of banks and financial institutions like Sanima Bikas Bank and Nepal Share Markets and Finance Company have applied to the central bank for upgradation to the Class-A commercial banks. But the central bank has halted their process till the new Monetary Policy.

Meanwhile, the Monetary Policy will have a serious challenge to address the rise in cost of fund due to hike in lending rates. "The rise in interest rates in recent months have been successful in increasing the deposit, but it has also put pressure on lending rates hurting the investors," the governor accepted.

Khatiwada also appealed the people not to hord cash at home and have faith on banking insititutions as there is enough liquidity in the banking system unlike last Dashain.

Financial Sector Reform

KATHMANDU: The review of new UK government’s grant assistance policy has hit Nepal’s Financial Sector Reform Programme. After the assurance of assistance, we will start the process of hiring the CEOs for the troubled Nepal Bank Ltd (NBL) and Rastriya Banijya Bank (RBB). The World Bank and DfID – the British agency – had been supporting the programme to restructure the NBL and RBB along with the central bank. “We are ready to start fresh process of hiring the CEOs for these two financial institutions,” Khatiwada said adding that the Nepal Rastra Bank (NRB) had invited applications for the post of CEO of NBL repeated but could not succeed. The central bank backed team is operating the NBL for last two-and-a-half year after the then foreign management left abruptly, though the RBB has seen not many changes.