Out of dozen banks and financial institutions that had applied for the much-sought after refinancing from the central bank, only two -- Citizens Bank International and Clean Energy Development Bank -- have taken the facility after Nepal Rastra Bank (NRB) eased the provisions.
"The two institutions -- Citizens Bank International and Clean Energy Development -- took Rs 570 million under the refinancing facility," said Gopal Kafle, spokesperson of the central bank. "Citizen Bank took Rs 430 million whereas Clean Energy Development Bank took Rs 140 million under refinancing facility," he said adding that apart from Himchuli Bikas Bank and Annapurna Finance, the remaining applicants are commercial banks that had asked the central bank to provide refinancing facility due to liquidity crunch.
Meanwhile, finance companies were not much attracted to the facility as only one finance company has applied for the facility.
The mid-term evaluation of the Monetary Policy has introduced refinancing tool to pump in liquidity in the banking system for productive sectors like tourism, hydropower, exports, agriculture, small and medium scale industry and other productive sectors.
The central bank has decided to extend refinance loans up to Rs 25 billion to the banks and financial institutions against collateral of good loans at an annual rate of 7.5 per cent. The financial institutions can charge only up to 10.5 per cent and can get such refinancing facility up to 40 per cent of their primary capital, according to the central bank.
The facility will be provided for six months and could be reviewed if new collaterals of good loans are provided.
Since last October, the market has been witnessing liquidity crunch. Bankers think that the psychological fear of depositors is behind the tight liquidity at present. "It started since last October, when the central bank could not provide cash in the market during the Dashain festival," he said adding that the source of income provision coupled with the political uncertainty has shaken depositors’ confidence from the banking system.
According to the NRB's nine months report, the liquid assets of the commercial banks stood at Rs 170.7 billion as at mid-April 2010. "Of the components of liquid assets, liquid fund declined by 7.8 per cent," said the central bank. "A decline in commercial banks' balance with the NRB as well as balance held abroad accounted for a contraction of liquid funds in commercial banks."
Sunday, May 30, 2010
Saturday, May 29, 2010
Lumbini Bank takes a turn around, churns profits
Lumbini Bank has set an example on how Nepalis themselves can turn a 'sick' financial institution into a sound and healthy one.
"When I took over the management of the bank four years back, it was in a state of collapse," said Shovan Deve Pant, CEO of the bank that was taken over by central bank in 2001 due to poor management. The central bank has clamped sanctions of March 7, 2006 restricting all major activities of the bank due to its high NPA, negative capital, serious noncompliances in various areas of accouting and income recognition and loan loss provisioning then.
After almost four years, Lumbini Bank has achieved capital adeqacy ratio of 24.23 per cent that is much above the regulatory requirement of 10 per cent and one of the best in the industry, he said adding that the NPA -- another barometer of the bank's financial health -- has come down to 4.66 per cent from 40.54 per cent in 2006.
The central bank has been restructuring the Nepal bank Ltd and Rastriya Banijya Bank with the grants. But still the restructuring of these banks are going on.
The zero deviation between unaudited and audited report of the bank for the fiscal year 2008-09 also reveals that the bank has improved its internal auditing. The bank has posted Rs 332.20 million profit in the fiscal year 2008-09.
"We now complied to all the central bank directives in regard to capital, NPA and increased income by more than five times in very difficult situations of emabargoes from NRB," Pant added.
After its financial health improved significantly, the Nepal Rastra Bank board has lifted all the sanctions from March 28, 2010. "We are proud to be one of the safest bank in Nepal's financial market," he added.
"When I took over the management of the bank four years back, it was in a state of collapse," said Shovan Deve Pant, CEO of the bank that was taken over by central bank in 2001 due to poor management. The central bank has clamped sanctions of March 7, 2006 restricting all major activities of the bank due to its high NPA, negative capital, serious noncompliances in various areas of accouting and income recognition and loan loss provisioning then.
After almost four years, Lumbini Bank has achieved capital adeqacy ratio of 24.23 per cent that is much above the regulatory requirement of 10 per cent and one of the best in the industry, he said adding that the NPA -- another barometer of the bank's financial health -- has come down to 4.66 per cent from 40.54 per cent in 2006.
The central bank has been restructuring the Nepal bank Ltd and Rastriya Banijya Bank with the grants. But still the restructuring of these banks are going on.
The zero deviation between unaudited and audited report of the bank for the fiscal year 2008-09 also reveals that the bank has improved its internal auditing. The bank has posted Rs 332.20 million profit in the fiscal year 2008-09.
"We now complied to all the central bank directives in regard to capital, NPA and increased income by more than five times in very difficult situations of emabargoes from NRB," Pant added.
After its financial health improved significantly, the Nepal Rastra Bank board has lifted all the sanctions from March 28, 2010. "We are proud to be one of the safest bank in Nepal's financial market," he added.
Nepal gets $42 million IMF loan
The International Monetary Fund (IMF) approved an immediate loan of $42.05 million to help address Nepal's economic troubles.
The loan was approved under the Washington-based fund's rapid credit facility, which provides swift and flexible financial assistance for low-income countries that face an urgent balance of payments need, according to the washington-based lending agency.
The move came as the main political parties yesterday agreed to extend Constituent Assembly's (CA) term, in a dramatic eleventh-hour deal to avert political crisis. The Maoist party said the leaders had agreed to form a new national consensus government as part of the deal.
Under the deal reached late hours yesterday, Prime Minister Madhav Kumar Nepal had agreed to resign within a week.
The IMF said in a statement that the zero interest rate loan did not require any explicit programme-based conditionality or review.
However, it said, economic policies were expected to address underlying balance of payments (BoP) difficulties and support macroeconomic stability and poverty reduction.
The country is experiencing a significant decline in exports widening the trade deficit, and a worsening of economic confidence, which has contributed to a large deterioration in the current account balance and a decline in international reserves as well as a liquidity crunch in the banking sector.
According to the central bank's first nine month's report, the country has recorded a BoP deficit of Rs 22.1 billion and total trade deficit has expanded by 58.9 per cent to Rs 238.47 billion. Similarly, the gross foreign exchange reserves have dropped by 15.8 per cent to Rs 235.75 billion.
"The government's policy programme, supported by the IMF, is aimed at addressing these risks and stabilising international reserves," said IMF deputy managing director Naoyuki Shinohara. "At the core of the programme are a tight monetary and fiscal policy stance to support the exchange rate peg, which remains Nepal’s anchor for macroeconomic stability, and efforts to improve financial sector soundness."
The loan was approved under the Washington-based fund's rapid credit facility, which provides swift and flexible financial assistance for low-income countries that face an urgent balance of payments need, according to the washington-based lending agency.
The move came as the main political parties yesterday agreed to extend Constituent Assembly's (CA) term, in a dramatic eleventh-hour deal to avert political crisis. The Maoist party said the leaders had agreed to form a new national consensus government as part of the deal.
Under the deal reached late hours yesterday, Prime Minister Madhav Kumar Nepal had agreed to resign within a week.
The IMF said in a statement that the zero interest rate loan did not require any explicit programme-based conditionality or review.
However, it said, economic policies were expected to address underlying balance of payments (BoP) difficulties and support macroeconomic stability and poverty reduction.
The country is experiencing a significant decline in exports widening the trade deficit, and a worsening of economic confidence, which has contributed to a large deterioration in the current account balance and a decline in international reserves as well as a liquidity crunch in the banking sector.
According to the central bank's first nine month's report, the country has recorded a BoP deficit of Rs 22.1 billion and total trade deficit has expanded by 58.9 per cent to Rs 238.47 billion. Similarly, the gross foreign exchange reserves have dropped by 15.8 per cent to Rs 235.75 billion.
"The government's policy programme, supported by the IMF, is aimed at addressing these risks and stabilising international reserves," said IMF deputy managing director Naoyuki Shinohara. "At the core of the programme are a tight monetary and fiscal policy stance to support the exchange rate peg, which remains Nepal’s anchor for macroeconomic stability, and efforts to improve financial sector soundness."
Friday, May 28, 2010
Budget surplus rises despite hike in govt spending
Despite registering the increment of 30.9 per cent in the government expenditure, in the first nine months of the current fiscal year, government has observed the budget surplus of Rs 10.3 billion.
According to the Nepal Rastra Bank (NRB)’s macroeconomic report of nine months of the current fiscal year, the government budget surplus on cash basis stood at Rs 10.30 billion compared with a budget surplus of Rs 12.72 billion in the same period last fiscal year. "The budget surplus stood at Rs 4.94 billion in the eighth month of the current fiscal year," according to the central bank.
Meanwhile, the total government spending has increased by almost a double at 30.9 per cent amounting to Rs 140.09 billion, due to higher recurrent and capital expenditure, in the mid-April, which had increased by 18.5 per cent only in the same period last fiscal year.
The recurrent expenditure alone has increased by 28.5 per cent to Rs 90.94 billion due to increased salary and allowances of civil servants, rising expenditure on special security plan, larger subsidies to public schools, increased economic assistance," the report said.
Similarly, capital expenditure has also increased by 47.5 per cent to Rs 28.35 billion which had declined by 2.5 per cent in the same period last year.
"Only 26.7 per cent of the budget estimate on capital expenditure has been spent so far," the NRB said. The low expenditure has been due to delay in the approval of budget, lingering in the contract process, absence of representatives in local bodies as well as weak law and order situation in the country. In the eighth months, only Rs 79.37 billion of recurrent budget and Rs 22.45 billion of capital budget had been spent.
A positive impact of 'Tax Compliance Year', increase in PAN number holders, mobilisation of tax volunteers, control in revenue leakages and tax administration reforms has contributed to 28.2 per cent growth of revenue mobilisation to Rs 126.53 billion, whereas in the eight months the revenue mobilisation was at Rs 105.58 billion.
The revenue collection has slowed down as in the last fiscal year’s same period, government had been able to register a growth of 39.3 per cent.
"Value Added Tax (VAT) contributed most to the total revenue as it grew by 40.6 per cent to Rs 38.50 billion. It had increased by only 23.2 per cent in the same period last year," said the report. "In the eighth month also, VAT had grown by 43 per cent registering Rs 33.36 billion in the government’s kitty."
Increased consumptions and reforms in VAT administration has been attributed to such a growth in VAT.
Similarly, Increase in imports of high tax yielding vehicles and spare parts pushed the customs revenue up by 35.9 per cent to Rs 25.07 billion compared with 25.7 per cent rise in the same period of last year. Customs collection had grown by 43 per cent in the eighth months of the current fiscal year.
Excise revenue increased by 60.3 per cent to Rs 16.94 billion against an increase of 45.1 per cent in the same period of last year. Likewise, a positive impact of tax compliance year and increase in PAN number holders has attributed to 22.2 per cent increase in income tax amounting to Rs 23.47 billion. In the first eight months, it had grown by 20.7 per cent to Rs 17.52 billion.
However, non-tax revenue has declined by 8.6 per cent to Rs 16.07 billion compared with an increase of 68.7 per cent in the same period last year.
According to the Nepal Rastra Bank (NRB)’s macroeconomic report of nine months of the current fiscal year, the government budget surplus on cash basis stood at Rs 10.30 billion compared with a budget surplus of Rs 12.72 billion in the same period last fiscal year. "The budget surplus stood at Rs 4.94 billion in the eighth month of the current fiscal year," according to the central bank.
Meanwhile, the total government spending has increased by almost a double at 30.9 per cent amounting to Rs 140.09 billion, due to higher recurrent and capital expenditure, in the mid-April, which had increased by 18.5 per cent only in the same period last fiscal year.
The recurrent expenditure alone has increased by 28.5 per cent to Rs 90.94 billion due to increased salary and allowances of civil servants, rising expenditure on special security plan, larger subsidies to public schools, increased economic assistance," the report said.
Similarly, capital expenditure has also increased by 47.5 per cent to Rs 28.35 billion which had declined by 2.5 per cent in the same period last year.
"Only 26.7 per cent of the budget estimate on capital expenditure has been spent so far," the NRB said. The low expenditure has been due to delay in the approval of budget, lingering in the contract process, absence of representatives in local bodies as well as weak law and order situation in the country. In the eighth months, only Rs 79.37 billion of recurrent budget and Rs 22.45 billion of capital budget had been spent.
A positive impact of 'Tax Compliance Year', increase in PAN number holders, mobilisation of tax volunteers, control in revenue leakages and tax administration reforms has contributed to 28.2 per cent growth of revenue mobilisation to Rs 126.53 billion, whereas in the eight months the revenue mobilisation was at Rs 105.58 billion.
The revenue collection has slowed down as in the last fiscal year’s same period, government had been able to register a growth of 39.3 per cent.
"Value Added Tax (VAT) contributed most to the total revenue as it grew by 40.6 per cent to Rs 38.50 billion. It had increased by only 23.2 per cent in the same period last year," said the report. "In the eighth month also, VAT had grown by 43 per cent registering Rs 33.36 billion in the government’s kitty."
Increased consumptions and reforms in VAT administration has been attributed to such a growth in VAT.
Similarly, Increase in imports of high tax yielding vehicles and spare parts pushed the customs revenue up by 35.9 per cent to Rs 25.07 billion compared with 25.7 per cent rise in the same period of last year. Customs collection had grown by 43 per cent in the eighth months of the current fiscal year.
Excise revenue increased by 60.3 per cent to Rs 16.94 billion against an increase of 45.1 per cent in the same period of last year. Likewise, a positive impact of tax compliance year and increase in PAN number holders has attributed to 22.2 per cent increase in income tax amounting to Rs 23.47 billion. In the first eight months, it had grown by 20.7 per cent to Rs 17.52 billion.
However, non-tax revenue has declined by 8.6 per cent to Rs 16.07 billion compared with an increase of 68.7 per cent in the same period last year.
Thursday, May 27, 2010
Global economic crisis hits remittance inflow
Though, the number of Nepali migrant Nepali workers going for blue-collar jobs abraod has not decreased, the remittance inflow has slowed down.
According to Nepal Rastra Bank (NRB)'s macroeconomic report, in the first nine months of the current fiscal year remittance has shown slow growth of 9.6 per cent amounting to Rs 164.929 billion. In the corresponding period of the last fiscal year, it had increased by 60.3 per cent.
However, the number of migrant workers has touched 202,794 in the first nine months of this fiscal year. The number of Nepali migrant workers going abroad was 175,958 in the same period last fiscal year.
Within the first nine months of the fiscal year 2009-10, remittance escalation rate has gone down from the growth rate of 35.3 per cent in the first month – mid-august -- to 9.6 per cent in mid-April. While in the last fiscal year, remittance increment had gone up from 31.2 per cent to 42.5 per cent at the end of the fiscal year 2008-09.
Meanwhile, in the first month of the current fiscal year, the remittance had registered a growth of 35.3 per cent against the growth of 31.2 per cent in the corresponding period of last fiscal year.
In mid-September 2009, increment in remittance went down to 19.7 per cent since then it has been fluctuating – reaching 6.6 per cent in mid-November and it again increased to 10.4 per cent in mid-December from there it rose to 13.6 per cent in mid-February 2010. However, in mid-March remittance has gone down to 9.9 per cent.
International Monetary Fund (IMF) has also estimated the slowdown of remittance growth rate to an average of 11 per cent. "Since most of the destinations for foreign employment is still bearing the burnt of international economic crisis, our remittance is not growing as much as it has to,” said NRB’s spokesperson Gopal Kafle. "Besides, there is a speculation doing rounds that workers have been holding the cash for investment purpose instead of sending it back home," he said adding that the central bank is also suspicious that remittance money is being invested somewhere outside Nepal so that the incomes earned from abroad is not visible in the formal accounts. Kafle also blamed informal channels for the remittances’ slow growth in comparison to that of last year.
This retarded growth rate of remittance has affected the Nepal’s Balance of Payments (BoP) which is at the deficit of Rs 22.1 billion in the first nine months of the current fiscal year.
Similarly, at the time when there is liquidity crunch in the country, snail pace of remittance growth is also posing a great problem.
According to Nepal Rastra Bank (NRB)'s macroeconomic report, in the first nine months of the current fiscal year remittance has shown slow growth of 9.6 per cent amounting to Rs 164.929 billion. In the corresponding period of the last fiscal year, it had increased by 60.3 per cent.
However, the number of migrant workers has touched 202,794 in the first nine months of this fiscal year. The number of Nepali migrant workers going abroad was 175,958 in the same period last fiscal year.
Within the first nine months of the fiscal year 2009-10, remittance escalation rate has gone down from the growth rate of 35.3 per cent in the first month – mid-august -- to 9.6 per cent in mid-April. While in the last fiscal year, remittance increment had gone up from 31.2 per cent to 42.5 per cent at the end of the fiscal year 2008-09.
Meanwhile, in the first month of the current fiscal year, the remittance had registered a growth of 35.3 per cent against the growth of 31.2 per cent in the corresponding period of last fiscal year.
In mid-September 2009, increment in remittance went down to 19.7 per cent since then it has been fluctuating – reaching 6.6 per cent in mid-November and it again increased to 10.4 per cent in mid-December from there it rose to 13.6 per cent in mid-February 2010. However, in mid-March remittance has gone down to 9.9 per cent.
International Monetary Fund (IMF) has also estimated the slowdown of remittance growth rate to an average of 11 per cent. "Since most of the destinations for foreign employment is still bearing the burnt of international economic crisis, our remittance is not growing as much as it has to,” said NRB’s spokesperson Gopal Kafle. "Besides, there is a speculation doing rounds that workers have been holding the cash for investment purpose instead of sending it back home," he said adding that the central bank is also suspicious that remittance money is being invested somewhere outside Nepal so that the incomes earned from abroad is not visible in the formal accounts. Kafle also blamed informal channels for the remittances’ slow growth in comparison to that of last year.
This retarded growth rate of remittance has affected the Nepal’s Balance of Payments (BoP) which is at the deficit of Rs 22.1 billion in the first nine months of the current fiscal year.
Similarly, at the time when there is liquidity crunch in the country, snail pace of remittance growth is also posing a great problem.
Wednesday, May 26, 2010
Multimodal transport regulation to be developed
The freight forwarders today said that the Multimodal Transportation Act and Regulation is not practical.
Speaking during an intercation organised here today by the Nepal Intermodal Transport Development Board (NITDB) -- in association with Department of Commerce (DoC) and Nepal Freight Forwarders Association (NEFFA) -- to discuss on Multimodal Transportation Act and Regulation, they said that the forwarded liability is a key and the Act doesnot speak on that.
Multimodal Transportation is a transport-system operated using more than one mode of transport under control of one operator in two or more countries. Benefits of the model are faster transit, low paperwork, cast effective and one agency deal. The model also reduces formalities in port and customs when importing goods from third countries via India or vice versa.
According to NITBD, cargo containers are delivered at ICD and empty containers are received at the same place. Banks should play vital role in promotion of trade through investing in business against documents.
The government is initiating the act and regulation to increase export as the model promote safer way for export goods. Moreover, exporter or importer will have easy contact to agents as local agents are appointed under the model.
Speaking during an intercation organised here today by the Nepal Intermodal Transport Development Board (NITDB) -- in association with Department of Commerce (DoC) and Nepal Freight Forwarders Association (NEFFA) -- to discuss on Multimodal Transportation Act and Regulation, they said that the forwarded liability is a key and the Act doesnot speak on that.
Multimodal Transportation is a transport-system operated using more than one mode of transport under control of one operator in two or more countries. Benefits of the model are faster transit, low paperwork, cast effective and one agency deal. The model also reduces formalities in port and customs when importing goods from third countries via India or vice versa.
According to NITBD, cargo containers are delivered at ICD and empty containers are received at the same place. Banks should play vital role in promotion of trade through investing in business against documents.
The government is initiating the act and regulation to increase export as the model promote safer way for export goods. Moreover, exporter or importer will have easy contact to agents as local agents are appointed under the model.
NRB prepares to issue Foreign Employment Savings Bond
Nepal Rastra Bank (NRB) is planning to issue the Foreign Employment Savings Bond targetting the Nepali citizens working abroad.
This bond will be sold only to the Nepali citizens working in North Korea, Malaysia, United Arab Emirates, Saudi Arabia and Qatar, at present, said the central bank. Each bond will yield 9.75 per cent of interest and the issuing agency will get the commission of 0.25 per cent of the total amount while floating the primary issue.
The NRB has asked for the applications from licensed remittance service providers to work as an agent in the foreign countries to undertake the trading of this particular foreign employment bond. Only those remittance service providers that have a valid licence to operate its business in those any one or all of the five countries are allowed to apply.
The central bank spokesperson Gopal Kafle said that the Foreign Employment Bond will be able to bring the money earned by foreign employees in the formal channels. According to Kafle, "the workers can be able to earn higher interest from the purchase of this bond."
"This bond will help achieve multiple targets like it will help in increasing capital inflow to the nation and the cash will come through proper channels instead of going through hundis and other informal channels,” he said adding that due to some procedural technicalities the central bank has been little late. "But we are hopeful that the bonds will be sold in the primary market before the end of the fiscal year,” he added.
The Foreign Employment Bond (FEB) visualised in the budget for the fiscal year 2009-10 had targetted to collect Rs 7 billion. However, it seems the target has to be revised and the bond worth Rs 1 billion will be sold till the end of the fiscal year. The budget has promised to utilise remittance in productive sector. However, the fiscal year coming to an end in two months.
"The bond will be utilised to develop big projects,” said Purna Chandra Bhattrai, joint secretary of Ministry of Labour and Transport Management (MoLTM), who is also the member of FEB committee. "The committee has suggested the government to offer 9.75 per cent interest rate."
"As the banks and financial institutions are offering higher interest than offered by the FEB, we have to revise it," he said adding that conditions of tax rebate will also come in action plan.
"It will come soon after implementing process will be selected,” Bhattarai added. Bank and financial institutions will get 0.25 per cent commission when selling the bond.
Foreign Employment Promotion Board (FEPB) has conducted series of consultation meetings with banks, financial companies and remittance companies to implement the bond. However, its already the 11th month of the current fiscal year and the bond issuance might take another couple of months making it an ambitious and yet another paper-plan of the government. Around 1.2 million Nepalis are working in South Korea, Malaysia, United Arab Emirates and Qatar. The government is targeting around 10 to12 per cent of migrant workers to sell the bond.
This bond will be sold only to the Nepali citizens working in North Korea, Malaysia, United Arab Emirates, Saudi Arabia and Qatar, at present, said the central bank. Each bond will yield 9.75 per cent of interest and the issuing agency will get the commission of 0.25 per cent of the total amount while floating the primary issue.
The NRB has asked for the applications from licensed remittance service providers to work as an agent in the foreign countries to undertake the trading of this particular foreign employment bond. Only those remittance service providers that have a valid licence to operate its business in those any one or all of the five countries are allowed to apply.
The central bank spokesperson Gopal Kafle said that the Foreign Employment Bond will be able to bring the money earned by foreign employees in the formal channels. According to Kafle, "the workers can be able to earn higher interest from the purchase of this bond."
"This bond will help achieve multiple targets like it will help in increasing capital inflow to the nation and the cash will come through proper channels instead of going through hundis and other informal channels,” he said adding that due to some procedural technicalities the central bank has been little late. "But we are hopeful that the bonds will be sold in the primary market before the end of the fiscal year,” he added.
The Foreign Employment Bond (FEB) visualised in the budget for the fiscal year 2009-10 had targetted to collect Rs 7 billion. However, it seems the target has to be revised and the bond worth Rs 1 billion will be sold till the end of the fiscal year. The budget has promised to utilise remittance in productive sector. However, the fiscal year coming to an end in two months.
"The bond will be utilised to develop big projects,” said Purna Chandra Bhattrai, joint secretary of Ministry of Labour and Transport Management (MoLTM), who is also the member of FEB committee. "The committee has suggested the government to offer 9.75 per cent interest rate."
"As the banks and financial institutions are offering higher interest than offered by the FEB, we have to revise it," he said adding that conditions of tax rebate will also come in action plan.
"It will come soon after implementing process will be selected,” Bhattarai added. Bank and financial institutions will get 0.25 per cent commission when selling the bond.
Foreign Employment Promotion Board (FEPB) has conducted series of consultation meetings with banks, financial companies and remittance companies to implement the bond. However, its already the 11th month of the current fiscal year and the bond issuance might take another couple of months making it an ambitious and yet another paper-plan of the government. Around 1.2 million Nepalis are working in South Korea, Malaysia, United Arab Emirates and Qatar. The government is targeting around 10 to12 per cent of migrant workers to sell the bond.
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