Kathmandu, July 8

Stakeholders have urged Nepal Rastra Bank (NRB) to give optimum priority to stabilising the banking interest rate and addressing the credit crunch issue in the Monetary Policy for 2019-20, which the central bank is planning to introduce next week.

Speaking at a discussion programme organised by the central bank here today, the business community said that the Monetary Policy for 2019-20 should ensure conducive environment for doing business by controlling the interest rate fluctuations on loans and bringing it down to a single digit, while bankers opined that NRB should adopt possible ways to address the historical liquidity crisis and credit crunch issues.

“The financial sector has a crucial role in materialising the government’s goal of achieving 8.5 per cent growth in the next fiscal year. Thus, it is equally important to promote business growth in the country, which is possible only by ensuring predictable and stable financial market,” said Bhawani Rana, president of the Federation of Nepalese Chambers of Commerce and Industry.

Similarly, Rana also said that the central bank should expand the refinancing fund to Rs 100 billion to ensure necessary capital for investment in the country. Bringing down spread rate to three per cent, making banks invest at least 20 per cent of their loan portfolio in the energy sector and promoting small and medium enterprises are other priorities that the Monetary Policy needs to encompass, she stated.

Similarly, Kamlesh Agrawal, vice president of Nepal Chamber of Commerce, opined that the Monetary Policy should be expansionary in nature so as to achieve the targeted economic growth. “Along with this, the central bank should ensure effective supplies in the market to keep inflation within the six per cent target in the next fiscal and discourage banks from practising cartel in deposits,” he added.

Shyam Giri, president of Federation of Nepal Cottage and Small Industries, mentioned that optimum focus should be given on promoting small enterprises at the local levels to achieve desirable economic and development goals.

Meanwhile, bankers said the Monetary Policy should focus on capital formation to ensure financial stability in Nepal. “The interest rate instability, especially on the lending front, is due to lack of investable funds since last two years. The central bank should come up with some measures that will permanently address this problem,” said Gyanendra Dhungana, president of Nepal Bankers’ Association.

Regarding merger and acquisition among banks, Dhungana said that the central bank’s policy should encourage the banks to go for merger and acquisition rather than forcing them to do so.

Addressing the participants, NRB Governor Chiranjibi Nepal said that the Monetary Policy will be in line with the budget for 2019-20 and its economic and development goals. Regarding the merger and acquisition front, Nepal said that merger between banks will not only bring down the number of financial institutions in the country and raise their capital, thereby enhancing their lending capacity, but will also bring down the cost of financial technology (FinTech) in the country.