Central Bank continue to keep monetary policy accommodative

Kathmandu, Feb. 14

Nepal Rastra Bank has offered another opportunity for the enterprises severely affected by the COVID-19 pandemic with the extension of application window for loan rescheduling and structuring till mid-July.

Responding to the tourism entrepreneurs demand to extend the deadline and bring down the amount of interest of the loan repaid, the central bank has announced the new provision through the mid-term review of the Monetary Policy of the current Fiscal Year 2020/21.

Speaking at a virtual programme to announce the review, Governor of the NRB Maha Prasad Adhikari said that the tourism entrpereneurs said they were unable to repay 10 per cent loan and couldn't applied for the facility so the interest repayment is brought down to 5 per cent and application window is extended to the fiscal year end.

Earlier the central bank had announced that the businesses affected by the pandemic could apply for the loan rescheduling and restructuring by mid-January 2021. But they must have paid at least 10 per cent interest of the loan.

Governor Adhikari said that the growth of credit was satisfactory but the policy rate could be reviewed in the days to come but it would remain same for this quarter.

"Our aim is to facilitate the market. The NRB has implemented accommodative and liberal policy measures for entrepreneurs as well as the banks," he said.

He stated that the central bank was concerned to the quality of the loans and 5 per cent provisioning would give the needed cushion for the future risks for the time being.  The NRB has said that the loan to value ratio would be reviewed when the economic activities turn to normalcy.

In the review, the NRB has announced that necessary steps would be taken to increase the access of hydropower projects with less than 10 Megawatt capacity to the special refinancing.

Monitoring of the deprived and priority sector loan and punishment to the abusers of such facility would be made more effective.

The central bank has also indicated that the limit of the digital transaction would be reviewed to promote electronic payment and additional policy instrument would be created to promote QR code and other e-payments.

Banks and Financial Institutions (BFIs) can count their expenditure on financial literacy on electronic transaction on corporate social responsibility (CSR). Likewise, the NRB has also said that the current ceiling of foreign currency exchange provided to the imports as per the Documents Against Payment or Documents Against Acceptance would be reviewed.

Since economic activities have been turning to normal and loan mobilisation is increasing, there was a pressure on price and external sector stability. Full operation of industries and businesses has jumped to 54 per cent in the post-lockdown situation while production reached 50 per cent in December last year, according to the NRB survey.

"The NRB has mopped up Rs. 241 billion liquidity from the market. The excess liquidity is being gradually utilized as the life and economy turning to normal status," said Adhikari.

With the mobilisation of concessional loan and refinancing, government expenditure and increased remittance inflow, there is sufficient liquidity in the system. 60,879 concessional loans have been mobilised by the end of the first six month of the current fiscal year 2020/21.

He said that Nepal Bank's case was unusual and not comfortable for NRB as well.

"It was a result of communication gap among the bank, Finance Ministry and central bank," he said. Chairman of NBL Bashudev Adhikari resigned from his post as according to him, he was not allowed to distribute the dividend to the investors even after the approval from the finance ministry.

Published in The Rising Nepal daily on 15 February 2021.