KATHMANDU, JULY 13

The Confederation of Nepalese Industries (CNI) has suggested Nepal Rastra Bank (NRB) to focus on capital expansion to productive and priority sectors in the Monetary Policy for next fiscal year 2022-23.

Submitting its suggestions to the NRB Governor Maha Prasad Adhikari on Tuesday, CNI suggested that the upcoming Monetary Policy should endorse import-substitution policy with promotion of export-oriented industries and overcome economic stresses like liquidity crunch and stagflation, among others.

The confederation has called for the monetary policy to incorporate provisions to lure foreign investment in productive and priority sectors of Nepal.

It has also urged NRB to endorse the regulation for blended finance and hedging. It has also proposed facilitating mobilisation of capital by issuing longterm loan instruments such as green bonds nationally and internationally in development projects and productive sectors.

'NRB should be aware of the negative impact on the industry's income due to decrease in demand resulting from the rise of non-performing loans of banks and financial institutions, which has further constricted investment,' the letter read, ' Hence, the upcoming monetary policy should not adversely affect the BFIs.'

In tune with the changing times, the CNI has proposed the central bank to adopt a specialised and competitive banking system with structural reforms through the monetary policy. Likewise, it has suggested replacing the collateral-based credit flow through project-based credit flow to promote entrepreneurship and new innovations in Nepal.

In a bid to promote small and medium enterprises, it has advised the NRB to provide collateral-free loans on certain government guarantee by creating Rs 10 billion 'Productive and Service Sector Promotion Investment Fund'.

CNI has emphasised on the need to maintain a CD ratio with a ceiling at 92.5 per cent to increase the credit flow to achieve the government economic growth target.

Similarly, considering the current liquidity crunch, it has also recommended the central bank to extend the timeframe for commercial banks to mobilise up to 80 per cent of their reserves in the productive sector at the local levels within mid-July, 2023.

To add liquidity in BFIs, it has also recommended allowing 50 per cent of savings in the treasury of the provincial governments and 25 to 30 per cent of the central government to be calculated in CD ratio.

A version of this article appears in the print on July 14, 2022, of The Himalayan Times.