KATHMANDU, JUNE 19
As the Nepal Rastra Bank (NRB) is preparing the Monetary Policy for the fiscal year 2022-23, the Chamber of Industries, Morang (CIM) has submitted a 21 -point suggestion that the policy for the upcoming fiscal year should aim to maintain financial stability by mobilising domestic and export oriented industries, and overall productive sector to tackle the financial stress like liquidity crunch, sky-rocking prices of commodities and raw materials in the international market due to Ukraine-Russia war, rise of imports, the decline in foreign exchange reserves, among others.
In a bid to address the liquidity crunch in banking and financial institutions (BFIs), CIM has stated that the Monetary Policy for the next fiscal year should arrange the mobilisation of a non-active fund in the government treasury. Similarly, it has also proposed reducing the ceiling of cash reserve ratio (CRR) that BFIs have to maintain in NRB and increase the investable liquidity.
Also, it said that the credit disbursed in the productive sector should not count in the credit-deposit (CD) ratio.
As the manufacturing industries have been severely hit by the COVID-19 pandemic, liquidity crisis, and inflation, the chamber has suggested that the coming Monetary Policy should facilitate BFIs' credit-risk management for productive sectors for at least two years until the financial stability has been achieved.
CIM has urged the NRB to ensure sufficient foreign currency for the import of raw materials, machinery, and other materials required by the domestic and export-oriented industries. Moreover, it is seeking an increase in the credit limit for productive sectors and continuity of refinancing facilities.
The interest rate of credit to the productive sector and other sectors should be differentiated, as per CIM. The credit to the productive sector should be kept to a minimum.
"Also, interest rates on loans to manufacturing industries should be fixed for at least five years for predictable financial management."
Since it takes time for a start-up to manage cash flow by distributing its products and through sales, the CIM has sought moratorium on loans from BFIs for such firm for at least two years. Also, it has demanded to make arrangements of policy to provide the loans for start-up entrepreneurs considering their projects as collateral.
It has suggested that NRB revise the documents against payment (DAP) and telegraphic transfer regarding the ceiling on import amount.
A version of this article appears in the print on June 20, 2022, of The Himalayan Times.
