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.