FNCCI urges to manage liquidity

 Kathmandu, Dec. 13

The Federation of Nepalese Chambers of Commerce and Industry (FNCCI) has urged the Nepal Rastra Bank (NRB) to take special initiatives for liquidity management, interest rate stability and price stability at the time when internal and external factors are affecting the national economy.

"The private sector of Nepal is probably going through the most difficult situation so far," said FNCCI President, Shekhar Golchha who led a delegation of his organisation to call on Governor of the NRB, Maha Prasad Adhikari on Tuesday. His delegation has reiterated the earlier suggestions to give impetus to the economy through the interest rate stability and scrapping of the provisions for the working capital loan guidelines recently implemented by the central bank.

As per the guidelines, a firm with an estimated annual transaction up to Rs. 20 million will get loan up to 20 per cent of its annual turnover. However, it can obtain up to 40 per cent of annual turnover amount in special cases. The working capital loan includes cash credit, short-term loans, terms loans and import-export related loans. The new provisions have clauses whereby the businesses seeking such loan should submit the audit reports of the past five years and it should be utilised for the commercial purposes.

However, the entrepreneurs have been demanding the repealing of the guidelines saying that it has come at a difficult time when businesses are struggling for their survival so should be postponed at least for two years. But the central bank has tightened the noose suspecting the misuse of such loans, for example in the real estate. 

Golchha said that since there has been a decline of up to 60 per cent in the businesses like cement, steel bars, real estate business, construction, and automobiles, the NRB should work to create an environment that makes the entire private sector viable.

The FNCCI also maintained that according to the banks, about Rs. 60 billion of refinance loans will be returned from the bank financing institutions to the central bank by the end of the first half of the current fiscal year 2022/23. This will not only cause problems for entrepreneurs, it will further deepen the liquidity crisis. So, at least one year loan renewal facility should be given in case of refinance, read the statement issued by the FNCCI on Tuesday.

In its memorandum submitted to the governor, the FNCCI has also asked to increase the government's capital expenditure, implement the automated process for the foreign direct investment as announced the budget of this fiscal, and start the process for country rating.

In response, Governor Adhikari assured the private sector delegation that he would study the suggestions given by the FNCCI and take necessary steps. 

Published in The Rising Nepal daily on 14 December 2022.