Private sector asks central bank to cut interest rate by 2 per cent

Kathmandu, Feb. 6: Businessmen have asked the Nepal Rastra Bank (NRB) to cut the interest rate of refinancing by 2 per cent and bring down to 7 per cent.

They also demanded special refinancing facility for the manufacturing in order to support the sector's growth and its contribution to the Gross Domestic Product (GDP).

"It is very difficult for the manufacturing sector to increase production and obtain the funds required for the expansion and development. Therefore, refinancing should be provided to them," said president of Confederation of Nepalese Industries (CNI) Hari Bhakta Sharma at an interaction on 'Current macro-economic and banking status' organised by the NRB.

He asked the central bank about the status of the Rs. 100 billion fund for the economic revival in the aftermath of the earthquake and urged it to make it functional at the earliest.

Likewise, vice president of the Federation of Nepalese Chambers of Commerce and Industry (FNCCI) Shekhar Golchha urged the NRB to intervene in the money market to address the fund crisis and control the soaring interest rate.

He pointed towards the need of the project financing to support the entrepreneurship growth and hedging provision to attract the Foreign Direct Investment (FDI) to reduce the foreign currency risk.

President of Nepal Bankers' Association (NBA) Gyanendra Dhungana said that the market was suffering from the liquidity crunch and to ease the interest rate liquidity should be enough in the banking system.

He also said that refinancing facility should be enhanced to support the priority sector.

Dhungana suggested that the NRB should scrap the credit to core capital cum deposit (CCD) ratio and increase the lending capacity of the banks and financial institutions.

"If the CCD ratio provision is removed, Rs. 150 billion that has been frozen in the banking system will make its way to the market. However, refinancing is the long-term solution," he said.

The NRB organised the programme to collect suggestions from the private sector and banking industry on the eve of the mid-term review of the Monetary Policy for the Fiscal Year 2018/19.

Published in The Rising Nepal daily on February 7, 2019.