The Nepal Rastra Bank Governor Maha Prasad Adhikari unveiled the Monetary Policy for the fiscal 2021-22 today with its primarily focus on revival of the COV- ID-affected enterprises.

The Monetary Policy gives continuity to the refinancing policies put in place last fiscal to help reduce the brunt of the coronavirus pandemic on industries.

Moreover, the banks and financial institutions are now required to maintain the credit-deposit ratio at maximum of 90 per cent, against 85 per cent requirement in the Monetary Policy of 2020-21.

Meanwhile, the provision of the credit to core capital plus deposit (CCD) ratio has been scrapped for this fiscal year. The previous Monetary Policy had revised the CCD ratio to 85 per cent from 80 per cent. The CCD ratio is the limit to which banks are allowed to issue loans and advances.

To further promote merger and acquisition between commercial banks, the Monetary Policy has cut the cash reserve ratio (CRR) by 0.5 per cent for a year after commencement of joint operation, scrapped a provision whereby the board members and executives of the merged entities had to complete six months of dormant period before joining another institution, and ensured leniency in interest rate spread.

The Monetary Policy also addresses the concerns of hospitality, entertainment, and aviation sectors that have been hit hardest by the pandemic. It also pays special attention to the sectors facing liquidity crunch due to the pandemic.

The policy has a provision of loan up to Rs 2 lakh for the repair and maintenance of the public transport, another sector badly hit by the pandemic.

In the new Monetary Policy, the scope of mobilisation of financial resources has also been expanded.

Stating that the inflow of remittances has been boosting consumption and increasing the purchasing power of general population, Governor Adhikari said those depositing the remittance money in banks and financial institutions could get additional one per cent interest.

"This, in turn, is expected to encourage channelling remittances through the banking sector and incentivise savings."

The permissible margin lending percentage has been unchanged from the previous Monetary Policy. To increase access to margin loans for small investors and minimise overexposure to risks of the capital market, the Monetary Policy has provisioned that an entity or individual can only take margin loans up to Rs 40 million from one financial institution and Rs 120 million in total.

The Federation of Nepalese Chambers of Commerce and Industry has welcomed the provisions of the monetary policy. "The monetary policy will have a positive impact on post-pandemic economic recovery, entrepreneurship development, and promotion of small- and medium-sized enterprises. However, the limit to margin loans could affect investor sentiment and the policy has not encompassed recommendations of the private sector for easing access to credit facility for realty and transport sectors," says the FNCCI statement.

Anil Shah, the CEO of Nabil Bank, said, "In this time of unprecedented uncertainty, the policy has made an attempt to maintain economic stability.

The growth of lending will be harnessed to some extent, while focus has been given to smaller loans and encouraging new entrepreneurs. Relief to sectors affected by COVID-19 is much needed, as recovery from the pandemic will take time. This relief is not only to specific sectors, but its impact will be felt positively by the financial sector, as well as the economy."

A version of this article appears in the print on August 14 2021, of The Himalayan Times.