Kathmandu- Nepal Rastra Bank has announced the monetary policy for the upcoming fiscal year 082/83 today. On Friday, Governor Dr. Bishwanath Poudel announced the first monetary policy of his tenure.

In the monetary policy announced by the National Bank, it is projected that credit to the private sector will expand by 12 percent for the upcoming year.

Similarly, the bank rate, which is the upper limit of the interest rate corridor, has been reduced from 6.5 percent to 6 percent and the deposit collection rate, which is the lower limit of the interest rate corridor, has been reduced from 3 percent to 2.75 percent. The policy rate has been reduced from 5 percent to 4.5 percent. Nepal Rastra Bank bonds will be issued as needed to make the structural liquidity management in the banking system effective. The limit of credit to be disbursed for construction/purchase of private residential houses will be increased from 20 million to 30 million. Arrangements will be made to maintain a loan-to-value ratio of up to 80 percent for such loans when building/purchasing a first home and up to 70 percent for others.

The guidelines on working capital loans will be revised as needed based on the nature of the business and the loan repayment-income cycle, including agriculture, small and cottage industries, education, health, sports, communication and media houses. The classification of existing loans and loan loss provisions will be studied and reviewed as needed. It has not been mentioned what kind of modifications will be made. Arrangements will be made to provide agricultural or commercial loans up to Rs. 1 million. Minimum loan loss will be provided during the grace period for loans up to 1 million rupees disbursed in this way. Loans disbursed up to 30 million rupees will be included in loans disbursed to small and medium enterprises and counted as loans disbursed in the designated sector. The arrangement related to capitalization of interest on loans disbursed in the energy production sector will be reviewed. The existing single customer loan limit for margin loans disbursed against shares by banks and financial institutions will be increased from 150 million rupees to 250 million rupees. Policy facilitation will be provided in the existing arrangement for blacklisting due to cheque dishonor.

Arrangements will be made to allow the amount of regulatory reserve created for non-banking assets to be counted as supplementary capital for two years after banks and financial institutions have accepted such assets. A draft of the necessary acts and rules will be formulated and submitted to the Government of Nepal for the establishment of an asset management company with the objective of assisting in the management of non-performing loans and non-banking assets of banks and financial institutions. In the context of the strengthening of the electronic payment system, the existing branch expansion policy of banks and financial institutions will be reviewed. The existing system for distributing dividends (cash or bonus) exceeding 15 percent per year by microfinance institutions will be reviewed. Loans up to 300,000 rupees disbursed to youth going for foreign employment, with or without collateral, can be counted as loans to the poor, and in the case of women, such a limit has been set at 500,000 rupees. Currently, there is a system to provide exchange facilities up to US$ 2,500 per visit to Nepali citizens traveling to countries other than India, but this exchange facility has been increased to US$ 3,000. In the context of the increasing contribution of remittance companies to the economy, such companies will be classified on the basis of capital and turnover. Legal and procedural arrangements will be made to establish ‘Neo Banks’ to expand financial access. Customer Identification (KYC) details of banks and financial institutions and other financial service providers will be facilitated through the national identity card. After the customer updates the details at any one bank, the necessary body will also be facilitated to develop infrastructure that can be obtained electronically.

The full text of the new monetary policy announced by the National Bank: