KATHMANDU; Nepal Rastra Bank (NRB) governor Dr Yubaraj Khatiwada today said that banks need to mobilise funds from unproductive sectors and channel these funds into productive sectors to improve the economy. At a programme organised here by Press Chautari Nepal to discuss the present economic situation and NRB’s responsibility, Dr Khatiwada assured that there was no need for panic. He added that “The economy is in bad shape but still under control.’ “The liquidity situation has also improved in the last three months; banks have already acted towards it by increasing deposit interest rates,” he said, adding, “Due to social, political and economic reasons, the cost of production has increased so much that industrialists should not expect interest rate to remain in single-digit.” He also said that NRB will tighten the monetary policy to tackle all these problems. Federation of Nepalese Chambers of Commerce and Industry (FNCCI) president Kush Kumar Joshi said the regular increase in interest rates on already borrowed funds’ shows banks’ insensitivity towards the troubled industrial sector. Anti-Money Laundering Act could be responsible for the liquidity crunch. While people are not afraid to disclose the money sources they are terrified that if they reveal their transactions they might end up victims of extortion or kidnapping. Nepal Bankers’ Association (NBA) president Sashin Joshi accepted admitted that the central bank and other banks failed to convince customers that the Anti-Money Laundering Act is an international rule that Nepal also has to follow. “The central bank has to boost the confidence of customers,” he said denying allegations that banks enjoy huge spread. He said the average spread is only 3.48 per cent.” He said, “Instead of wasting energy trying to decide who is responsible for the present situation, everyone should concentrate on finding the solution. Even though banks have already increased interest rates to attract deposits, things have not turned as expected.” “The existence of the informal economy which is larger than the formal economy, capital flight and lack of favourable environment for investment are responsible for bleeding the economy white,” Joshi added. Forum of Nepalese Banks’ Ashok Agarwal said that everyone is neglecting the capital market which is on the verge of crash and that there is an SOS situation due to liquidity crunch. Industrialist and CA member Diwakar Golchha said liquidity shortage can be attributed to co-operatives which have no monetary system yet and have deposits worth Rs 60 billion. Former NRB governor Bijaya Nath Bhattarai said along with the NRB’s monetary policy the government should formulate effective fiscal policy as tackling the double digit inflation and ever growing consumerism are challenges. NRB alone can not solve these problems, so the financial institutions themselves have to be discernable about the regulation of funds from unproductive sectors to productive ones. He said the people need to be informed about Anti-Money Laundering Act which is formulated worldwide to check the entry of drug and terrorist money in the financial system. Industrialist and CA member Rajendra Khetan and NCC’s president Surendra Bir Malakar also presented their views about the current economy.