Nepal | June 20, 2019

Monetary Policy 2018-19 to focus on financial stability, infra investment

Himalayan News Service

Kathmandu, June 10

Nepal Rastra Bank (NRB) has said that the Monetary Policy 2018-19, which the central bank is expected to unveil next month, will primarily intend to maintain financial stability in the country, promote agriculture and boost investment in the infrastructure sector.

Addressing a discussion programme in the Capital today, NRB Governor Chiranjibi Nepal said that the monetary policy for the new fiscal year will adopt measures to support and achieve targets set in the fiscal budget 2018-19 including economic growth target, inflation projection and agricultural and infrastructural goals.

“The budget for fiscal year 2018-19 has set targets on the basis of the country’s improving business and economic climate in the last couple of years. The monetary policy will try to capture this momentum of growth in the country which will lead to achieving the set economic growth and development targets,” stated Governor Nepal.

Similarly, the governor mentioned that the monetary policy for next fiscal year will introduce a few specific measures to maintain inflation within the 6.5 per cent projection of the government for 2018-19 and prioritise stability in the financial sector.

Former finance minister Madhukar SJB Rana said that the central bank should address key financial issues like people’s access to financial institutions and the unstable financial policies through the monetary policy.

Similarly, former NRB governor Dipendra Bahadur Kshetry, who is also former vice chairman of the National Planning Commission, insisted that the central bank should not only introduce supportive measures to accomplish the budget’s targets but also improve its regulatory framework.

“The central bank has mandated banks to inject at least 25 per cent of their total loan portfolio to various identified productive sectors. But are banks lending as per this provision,” questioned Kshetry.

He also mentioned that banks and financial institutions are reluctant to issue loans to youths against collateral of their academic certificates as envisioned by the fiscal policy.

On the occasion, Gyanendra Dhungana, president of Nepal Bankers’ Association, said that the monetary policy that the central bank will introduce for fiscal year 2018-19 has to be expansionary and ease capital formation in the country. He also stated that the monetary policy should adopt a policy to promote mergers between banks and financial institutions and expand the limit of overdraft facility for business loans, which is currently at 15 per cent.

Saroj Kaji Tuladhar, president of the Nepal Financial Institutions Association, said that the monetary policy should address the margin lending issue in the secondary market, which the budget has failed to do. Citing that the current monetary policy has squeezed housing loans, he urged the central bank to increase the loan-to-value ratio on home loans by 10 per cent to 50 per cent in Kathmandu Valley.


A version of this article appears in print on June 11, 2018 of The Himalayan Times.


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