Kathmandu, January 19

The Nepal Rastra Bank (NRB) has scrapped the provision requiring importers to deposit 50 to 100 per cent cash margin while opening letter of credit (LC) following the improvement in foreign currency reserves, which is currently sufficient to cover at least 10 months of imports.

Earlier, the central bank had imposed the rule to tighten imports and prop up the country's depleting foreign exchange reserves.

Issuing a circular today, the central bank announced the removal of all provisions related to cash margin deposits on imports. Earlier, the government had imposed a 100 per cent margin deposit for goods under 18 tariff lines and 50 per cent margin for goods under two tariff lines, which was later extended to 100 per cent margin deposit on import of goods under 27 tariff lines and 50 per cent margin deposit on import of goods under six tariff lines.

While the 100 per cent margin deposit applied to non-essential products including alcohol, tobacco, shampoos, umbrellas, footwear, silver, among others, the 50 per cent margin deposit applied to imported vehicles including, motorbikes, scooters and private diesel-run automobiles.

Last month, NRB had also removed the provision of cash margin on the import of construction materials.

According to stakeholders, the decision to scrap the provision is a welcoming step for the country's businessmen.

Manish Lal Pradhan, chairman of export promotion committee of the Federation of Nepalese Chamber of Commerce and Industry (FNCCI), said that the central bank's decision is a welcoming step for businesses in the country and it could also assist in reflecting some positivity on the country's economy in the coming days.

He, however, stressed that the lack of liquidity in the country's financial sector and the increased interest rates are the biggest challenges at present and should be dealt with utmost priority as well.

A version of this article appears in the print on January 20, 2023, of The Himalayan Times.