Government plans joint-venture bank to facilitate Nepal-China trade

The government is planning to set up a Nepali-China joint-venture (JV) bank to facilitate the trade between the two countries through banking facility.
Addressing the traders at an interaction – organised by Nepal Chamber of Commerce (NCC) here today – finance secretary Rajan Khanal said that the government is holding talks with the Chinese authorities to establish a JV financial institution to facilitate trade with the China through the banking system. “Establishment of a JV bank will make the Letter of Credit (LC) opening easy that will help formalise the trade,” he said, adding that a Chinese bank is likely to come to Nepal soon. “There is also a probability to create a JV with a government-owned bank.”
The private sector is also trying to bring a Chinese bank in Nepal to facilitate the trade with the northern neighbour since long. But they have not been successful in bringing any of them due to lack of suitable partner. “The traders are using Telex Transfer (TT) also known as wire transfer or draft to make the payment to the Chinese traders,” Khanal said, adding that the LC is an instruction from the importers to a bank in a foreign country to pay the money to the exporters when the required conditions are met while TT is the transfer of money from one bank account to another through electronic means.
The trade between Nepal and China is increasing in recent years. Nepal imported goods worth Rs 186.6 billion in the first 11 months of the current fiscal year 2018-19 from China, while it has exported goods worth Rs 1.96 billion to the northern neighbour.
Khanal, on the occasion, also said that the government is serious about addressing the grievances of the private sector. “The government is trying to create investment friendly environment with better incentives and tax waiver policies,” he said, asking the traders, however, to not run the businesses on tax incentives. “As Nepal is the members of the World Trade Organisation (WTO) and South Asia Free Trade Area (SAFTA), duties on import of foreign goods will go down gradually so you have to develop competitiveness.”
Likewise, revenue secretary Lal Shankar Ghimire, on the occasion, said that the government is planning to establish a Revenue Board in the first month in the next fiscal year.
The government has promised to establish a permanent Revenue Board since long. “It will come into existence from the beginning of the next fiscal year,” he said, adding that the government wants to have an intensive discussion with the private sector to make the board more effective, as the government wants to facilitate the business environment, “The Finance Ministry is developing a home delivery system for the Permanent Account Number (PAN) cards, which would be implemented soon.”
Ghimire also informed that the government is trying to protect the domestic products that have potential to make the country self-reliant. “The protection could sometimes be harmful for the consumers as the consumers have less choice, and the government also losses revenue but protection measures are being applied to let the domestic business grow and reduce the whopping trade deficit based on rising imports.”
President of the NCC Rajesh Kazi Shrestha, on the occasion, demanded the government not to promote industries that import raw materials. 

Nepal limits expenditure in India

The central bank today imposed a monthly limit on the amount of Indian Currency (IC) Nepalis can spend in India as the balance of payments (BoP) position of the country has been slipping into deficit for the last few months.
A visiting Nepali would not be able to spend more than Rs 100,000 IC every month while paying for goods and services in India, the central bank said, adding that it will help deal with the current account deficit situation.
Issuing a circular today, the central bank has barred class ‘A’ commercial banks and class ‘B’ development banks from allowing electronic payments of above Rs 100,000 IC per month from a bank account primarily to ease the foreign exchange reserve pressure of the country.
It is the first time that Nepal has enforced a limit on electronic payments for Nepali nationals in India. The policy applicable to prepaid, credit and debit cards of Nepali banks came into effect from today.
Currently, the central bank has set the cash withdrawal limit through cards in India at Rs 15,000 IC per day and a maximum withdrawal amount of Rs 100,000 IC per month. Apart from that, a Nepali national can also get Indian currency of up to Rs 25,000 IC while travelling to India.
The central bank move is a part of the policy adjustments that the economy was making to overcome economic crisis in multiple fronts, according to the central bank spokesperson Narayan Poudel. "The decision is taken to deal with the growing problem of current account deficit and the balance of payment crisis," he said, adding that the measure would however exempt payment in hospitals and pharmacies in India. "Similarly, the Rs 100,000 IC per month electronic payment cap also exempts the current cash withdrawal limit that Nepalis have been enjoying in Indian market."
Chief of the Foreign Exchange Management Department at the Nepal Rastra Bank (NRB) Bhisma Raj Dhungana said that NRB took the step to control capital flight that emerged due to the spending trends of Nepali citizens in India.
Apart from impacting the spending trends of Nepali consumers and tourists in India, the move is also expected to influence trade in the India-Nepal border areas where Nepali businessmen usually pay in Indian Currency.
Apartfrom the BoP deficit, the country has also been witnessing depletion in foreign exchange reserves forcing the central bank to impose a number of currency exchange controls.
Earlier in November, NRB had lowered the foreign exchange facility to $1,500 per passport for outbound Nepali travelers from the earlier ceiling of $2,500. The NRB had also reduced the limit on payments through Telegraphic Transfer (TT) to $30,000 from an earlier limit of $40,000.
According to the central bank, the BoP slipped into a deficit of Rs 57.33 billion in the last four months of the current fiscal year 2018-19, compared to a surplus of Rs 2.4 billion in the same period last fiscal year. Likewise, forex reserves have also dropped to $9.43 billion as of mid-November 2018 from $10.08 billion in the same period last year.

Foreign exchange limit for outbound Nepalis lowered to $1,500

The foreign currency exchange facility for a Nepali going for a foreign trip – except India – has been reduced to $1,500 from earlier limit of $2,500. The central bank has – issuing a directive today – reduced the maximum amount of foreign currency facility for a Nepali going abroad.
The commercial and development banks, authorised to sell foreign currency, can now sell only $1,500 per passport for a Nepali national going abroad, according to the central bank that has restricted the purchase of foreign currency due to foreign currency flight, and also depleting forex reserve. "The rising foreign currency flight is putting pressure on the foreign exchange reserves."
The rising income, in recent years, has fuelled the outbound travel – especially during long holidays – of Nepalis putting pressure on hard earned foreign currency that mostly comes in as remittance from the Nepali migrant workers.
The central bank has introduced the new rule to discourage the growing outflow of foreign currency on account of outbound tourism, according to the Forex Department of the central bank. In the last fiscal year of 2017-18, Nepalis spent Rs 79.6 billion in travel, some 40 per cent up from the amount two fiscal years ago, the department states. The country, however, earned Rs 177.47 billion in the fiscal year 2017-18 from foreign travellers coming to Nepal.
Likewise, the central bank has also reduced the limit on payments through Telegraphic Transfer (TT) to $30,000 from the earlier limit of $40,000.
The central bank has also raised the limit on loans for commercial banks from foreign banks to 50 per cent of core capital, up from 25 per cent to facilitate foreign currency borrowing by commercial banks. "The limit is being increased to facilitate the banks as they have not found possible lenders abroad due to low amount of borrowings," the central bank claimed.
The stronger dollar, in recent weeks, has also increased pressure on foreign exchange reserves. The US dollar has gone up nearly by 15 per cent from the beginning of the current fiscal year. A dollar costs Rs 117.3 today, up from Rs 102.5 on January 1.
According to the central bank, gross foreign exchange reserves has depleted to $9.75 billion as of mid-September 2018 from $10.08 billion as of mid-July 2018 also due weak Nepali rupee.