Three financial institutions get special refinancing facility

The central bank has approved special refinancing facility to three financial institutions today.
"Of the total 22 financial institutions applied for the new refinancing facility from the central bank, the central bank today provided special refinancing facility to three financial institutions," said president of Nepal Finance Companies' Association Rajendra Man Shakya.
Due to acute cash shortage for the day-to-day transactions, the financial institutions have applied to the central bank for the special refinancing facility.
The central bank on June 9 has opened a 'special' refinancing window for banks and financial institutions under lender of the last resort to avert systemic risk from tight liquidity situation.
Though the central bank has been providing refinancing facility since April to boost investment on productive sectors, "the new move has increased amount to 60 per cent of the capital fund against the good loan at seven per cent interest rate for four months against good loans. But the central bank today increased the interest rates to 10 per cent.
However, Shakya opined that it is a short-term measure. "The problem has been pushed forward to four months away not solved," he said, adding that the central bank should bring a long term strategy to solve the crisis.Due to low depositors' confidence deposit mobilisation could not grow at the rate it used to grow in the past years, Shakya added. "Series of failures of financial institutions due to various reasons the depositors have lost their faith on development banks and finance companies."
The Parliamentary committee has also last week asked the central bank to prepare a work plan to avert the systemic crisis in case the current liquidity crunch prolongs.
The special refinancing facility has been opened only for those financial institutions affected with tight liquidity situation and the central bank will provide the facility only after going through their latest financials.Instead of relying on emergency bailout measures, the central bank has also suggested the financial institutions to mobilise more deposits and manage assets liability mismatch.
The central bank has also asked the financial institutions to help each other as there has been a huge mistrust due to recent failures of financial institutions. Those financial institutions, that have excess liquidity should help out others providing inter-bank lending," senior deputy governor of the central bank Gopal Kafle said, adding that trust deficit among the financial institutions have also enlarged the tight liquidity situation currently.

Investors' plea
KATHMANDU: Nepal Investors' Forum on Monday organising an interaction on capital market asked the government to revoke capital gain tax and implement transaction tax, differentiate capital gain tax on tax short-term selling and long-term guarantee buy back, relax loan against shares, start margin lending facility, start CDS immediately, make the capital market regulator Securities Board of Nepal (Sebon) autonomous, relax cross-holding for some time, and punish the person responsible for the bad governance instead of letting the financial institutions to go to bankruptcy to boost the morale of the investors.