Kathmandu, December 30

Apprehensive about the high and unpredictable interest rates and lack of loanable funds with the banks, industrialists have urged the government to address the current scenario that has been adversely affecting the growth of the private sector.

Issuing a press statement today, Confederation of Nepalese Industries (CNI) has said that dramatic leap in interest rates has gradually started resulting in doing business in Nepal unviable, as the rate of returns has dropped significantly.

CNI has drawn the attention of the government to bring stimulus packages to address the issue as early as possible before the situation worsens and could have multiplier effect on the economy.

“Smooth growth of private sector lending is a must to achieve government’s growth target of 7.2 per cent this fiscal,” read the statement.

Credit growth was almost 30 per cent in the previous year, which resulted in the crisis of loanable funds as deposit growth could not keep pace.

“Increase in regulatory capital requirement by up to 300 per cent raised the appetite of banks to expand businesses to maintain certain level of profit growth. However, lack of government expenditure and sluggish remittance growth has hit potential sources of deposit,” said CNI, adding, “Central banks’ intervention during half-yearly review of monetary policy 2016-17, which allowed banks not to factor 50 per cent of credit disbursed to productive sector in credit to core capital cum deposit (CCD) calculation for six months, gave space for banks to expand credit.”

The CNI statement further said that if the government fails to take necessary steps to address the issue promptly, it will worsen the competitiveness of businesses and further plummet exports thereby widening ballooning trade deficit, squeeze investments and adversely affect economy for a longer period.