The central bank today opened the fifth window for the cash-strapped banks and financial institutions to avert systemic crisis and keep the faith of public intact on the financial system.
“We have opened a new window for the cash-strapped banks and financial institutions today to help them out,” central bank spokesperson Bhaskarmani Gyawali said, adding that the financial institutions can now borrow from another financial institutions against their good loan or the collateral (loan) accepted by the lender.
This new provision of interbank lending could be for maximum of six months and by the end of next fiscal year, they have to clear such transactions,” he added. “However, interest rates will be according to market rate fixed among themselves.”
Such inter bank borrowing could not be further lent and have to be used to pay the depositors only. “They cannot lend anymore,” Gyawali said.
Though the central bank had opened the special refinancing window — as a fourth measure — it would be issued only after the central bank went through the financial company’s books and assured of its good governance.
“The new window is expected to ease tight liquidity situation in the financial institutions,” Nepal Finance Company’s Association president Rabindra Shakya, said, adding that the financial institutions can help each other out. “Mistrust among the financial institutions is yet another reason that has exposed the current situation,” he added. “Those with excess liquidity can help others out.”
The financial institutions have been showing lower level of Non-Performing Loans (NPL) due to central bank’s directives but they have over exposure on real estate and lands, according to bankers.
“There is no problem in overall financial system but some financial institutions are facing liquidity problem due to their over exposure in the real estate and land,” Gyawali said, adding that the central bank is ready to help out financial institutions that are in trouble but they have to maintain good governance and shun fraudulent activities,” he said, adding that they have to manage the liquidity situation as the central bank has now opened five windows to help them out.
“If they cannot manage liquidity after central banks’ efforts, the central bank will have to take strict action against them like auctioning their lands and assets and pay the depositors,” he said, assuring the depositors not to be worried as their deposit is insured and central bank is ready to take care of their hard earned money.
NRB measures to ease liquidity crunch
1. Refinance to productive sector
2. Special refinancing window
3. Twice a week repo
4. Lender of the Last Resort
5. Relaxation in interbank lending.
Another finance company goes bust
KATHMANDU: World Merchant Bank and Finance Company on Monday tried to escape the withdrawal as it has been facing cash shortage to pay for its depositors since last couple of days. The finance company has on Monday asked for Special Refinancing Facility with the central bank. "If the finance company has been cheating the depositors, the central bank will take action against World Merchant Bank and Finance Company," said central bank spokesperson Bhaskarmani Gyawali. "No banks and financial institutions can refuse withdrawal in any excuse," he said. World Merchant Bank and Finance Company has been saying that it has not closed the transactions but has some liquidity problem that it would solve.
CIB nabs Khadka
KATHMANDU: Central Investigation Bureau (CIB) under Nepal Police on Monday arrested promoter of Capital Merchant Banking and Finance Amir Jung Khadka (28) resident of Baneshwor, on charge of Banking Offence Act. Fugitive Khadka, resident of Baneshwor is sent to Metropolitan Police Range for further action against him. Based in Battisputali Capital Marchant Banking and Finance has also been facing tight liquidity situation since last couple of weeks leading to a huge withdrawal, though it has not closed its transactions.
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