Kathmandu. Nepal Rastra Bank has made public the monetary policy for the current Fiscal Year 2077/07.
In monetary policy, banks with a distributable profit of less than 5% of the paid-up capital will not be allowed to pay cash dividends and NRB has taken a policy to reduce the salary of the bank's CEO. Similarly, the allowance of the directors of banks and financial institutions will also be reduced and the issuance of bank bonds will be extended by two years.
The new monetary policy has increased the Credit to Core Capital plus Deposit Ratio (CCD Ratio) from 80% to 85%. In simpler words, this means that banks are allowed to issue more amount as loans and advances, and can now put 5% less amount as a reserve to maintain liquidity.
Similarly, loans at 3 to 5 percent interest rate will be available to facilitate refinancing, the new license of the payment system company has been stopped, and the permission will be revoked if there are not 300,000 customers.
Similarly, the limit of CCD ratio has been increased from 80 percent to 85 percent, while the limit for loans secured by shares has been increased to 70 percent.
Highlights with full text
Projection of the 2077/ 78 fiscal year scenario
1) Annual Growth Rate target set at 7%.
2) Aim to limit consumer inflation no higher than 7%.
3) A permanent liquidity facility rate of 5% will be maintained as the upper limit of the interest rate corridor.
4) Deposit collection rate, which has been established as the lower limit of the corridor will be reduced from 2% to 1%.
5) The Repo Rate has been reduced from 3.5% to 3%.
6) Long-term Repo service will be made available to improve much-needed liquidity for financial rehabilitation.
7) The Mandatory cash ratio of 3 percent to be maintained by banks and financial institutions is kept intact.
8) The statutory liquidity ratio to be maintained by commercial banks of 10 percent, while that of development banks of 8 percent Percent and the finance company of 7 percent have been kept intact.
9) The lender of last resort rate has been kept intact at 5%.
10) Commercial banks will have to issue at least 15% of their loans in the agriculture sector by 2080 Ashadh end.
11) Agriculture Development Bank will be established as a "Lead Bank" in the agriculture sector. It can also issue Agriculture Bonds to ensure long-term availability of resources.
12) Inter-bank transactions of Agriculture Credit Swaps will be further simplified.
13) Commercial banks will have to issue at least 10% of their loans in the energy sector by 2081 Ashadh end.
14) Commercial Banks experienced in the energy sector will be allowed to issue Energy Bonds.
15) CCD Ratio has been increased from 80% to 85%.
16) BFi's with a distributable profit lower than 5% of their paid-up capital, the distribution of cash dividend will be forbidden.
17) BFI's with a distributable profit higher than 5% of their paid-up capital will be allowed to distribute 30% of dividends as cash dividend in maximum.
18) However, companies that satisfy the criteria in point 17 can't distribute cash dividend that amounts to a larger sum than their Deposit Weighted Average maintained in Ashadh 2077.
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