Balanced, flexible policy sought

Kathmandu, July 18:

Bankers and entrepreneurs have urged Nepal Rastra Bank (NRB) to devise a ‘balanced and flexible’ monetary policy for the current fiscal year, in order to give an impetus to sluggish economy.

They also asked the central bank to ease the provisions of foreign exchange on import of industrial materials from India; take initiative to increase interest rates on savings as well as set a projection of exchange rates for the period to at least one year.

Diwakar Golchha, first vice-president of the Federation of Nepalese Chambers of

Commerce and Industry (FNCCI) stressed the need of overhauling overall economic and fiscal policies for the balanced and sustainable development. “Economy has caught into a vicious cycle and growth has stagnated due to the imposition of the one-sided policies,” he said.

He was critical of the current policy that has victimised a larger number of depositors in the name of reducing high level of non-performing assets (NPA) in the banking sector. “The depositors are less paid in terms of interests for their savings or deposits in the bank, mainly because of unilateral imposition of one-sided policies,” Golchha said.

Jagadish Agrawal, chief of revenue committee at the Confederation of Nepalese Industries (CNI) said that the monetary policy should adopt a balanced approach in between free market economy and state welfare policies. “The central bank, while formulating monetary policy, cannot bypass the existing socio-economic and political scenarios,” he said adding that the past policies had largely advocated free market economy.

He also asked the NRB officials to have a projection of an annual exchange rate movement through the monetary policy, so that the private sector can make plan for trading in advance based on the projected rates. Agrawal further said that imports from India should be allowed in US dollars through Letter of Credit (LC), which is currently available only for the third country imports. He suggested to issue development bonds or debentures for the public to mobilise the required fund as the budget has projected Rs 20.56 billion net budgetary deficit and government’s intention to meet it through domestic borrowings. “The required capital can be mobilised with the participation of the public investors in bonds or debentures.”

Industrialist Rajendra Khetan suggested that the monetary policy should take initiatives at reducing the cost of doing business in the country. “The central bank can adopt monetary measures on short-term basis to boost the economy,” he added.

The annual policy document like the monetary policy should take measures to encourage the financial institutions for making investment from their high liquidity, said Chandi Raj Dhakal, president of FNCCI. He also underscored the need of revisiting difference in interest rates for lending and deposits.

Meanwhile, Sashin Joshi, vice-president of Nepal Bankers’ Association and CEO at NIC Bank, admitted that the low interest rate on deposits is mainly due to the central bank’s policy for setting a certain cap on treasury bills and bonds. “If NRB had let the market to decide freely on treasury bills and bonds, the interest rates on savings or deposit could have gone up automatically,” he said.

He also said that the central bank has direct or indirect influence in making difference in the value of US dollars. Joshi, however, said that the depreciation of the US dollar vis-à-vis Nepali rupee has had no significant impact on remittances. Citing security reasons and increasing cash transactions at the financial institutions, Joshi asked the central bank to fix a certain cap on cash transactions daily and encourage alternative measures like use of cheque.

Wrapping up the interaction, Krishna Bahadur Manandhar, officiating governor at the

NRB, said that the upcoming monetary policy will accommodate all the suggestions given by the experts and address the past errors.