KATHMANDU, JUNE 15
Nepal Rastra Bank Governor Maha Prasad Adhikari has said that the first responsibility of the central bank is to maintain stability in the financial and external sectors as well as to control inflation.
Speaking at a discussion programme on Monetary Policy for the fiscal year 2023-24 organised by the Management Association of Nepal (MAN), Governor Adhikari said that the countries globally are going through issues related to the economic slowdown and stagflation at present and that the central bank is working towards preparing the Monetary Policy for the upcoming fiscal year and expects to receive suggestions from all the concerned stakeholders to tackle the situation.
"During the COVID-19 pandemic, a lot of resources were allocated for the health sector due to the unprecedented scenario. Industries and businesses were having a hard time recouping their losses and repaying their loans. The central bank had then introduced provisions for refinancing and restructuring of loans as per the working capital requirement of such businesses. The NRB had eased provisions and provided liquidity for banks to provide loans for struggling businesses at the time. However, lack of monitoring and supervision during that time has weighed on the economy at present. The central bank will look into the suggestions given by concerned stakeholders while also prioritising its main responsibilities and objective in the Monetary Policy," he said.
He also clarified that the central bank will not regulate cooperatives but has formed a committee to study and make a report on the microfinance sector and that the policies for proper regulation of microfinance institutions will be formulated based on the committee's report. "We are well aware of the contribution of the microfinance sector to the country's development. Just because some institutions have been wayward, the whole microfinance sector cannot be blamed. The NRB will regularise them," he said, adding that people who take loans are not victims but beneficiaries and should be accountable for repaying their loans.
Stating that the inflation is already nearing eight percent, former finance minister Yuvraj Khatiwada remarked that the increased tax burden in imports of potatoes and onions will further fuel inflation. He also mentioned that banks in the country are already overcapitalised and requested all not to get confused.
"Our financial system is overcapitalised and it is time for banks to cool off. The increase of credit growth by 12 percent will be enough to achieve six percent economic growth and maintain inflation at 6.5 percent," he said. Khatiwada also urged banks to stop the disbursement of loans on asset accumulation but rather divert them towards income-generating sectors and that the spreadsheet should not be lowered below four percent.
He also remarked that the central bank should be more worried about the real estate market than the share market. Khatiwada also suggested the central bank to increase space for refinancing by one year instead of increasing interest rates.
At the programme, former NRB governor Ganesh Bahadur Thapa said that the economy has already entered a recession. He emphasised on the need to hold a multisectoral discussion composed of all stakeholders concerned to increase economic activities in the country. He stressed on the need to identify potential products across various sectors alongside introducing market and sales agents instead of just disbursing loans. He further shared that the rate of lending has decreased as a result of the high-interest rate and urged NRB to do the needful to encourage lending.
Tilak Rawal, former governor of NRB, opined that the whole responsibility of resolving economic issues should not be placed on the central bank alone.
At the programme, representatives of the private sector also gave suggestions to the NRB for the upcoming Monetary Policy and expressed hope it will address the issues seen across various sectors.
A version of this article appears in the print on June 16, 2023, of The Himalayan Times.
