Kathmandu, February 18

The private sector has been divided over the issue of government intervention in reducing the lending rates, which have soared over the months, raising the cost of doing business.

The Federation of Nepalese Chambers of Commerce and Industry, the largest business lobby group, has been asking the government put a cap on lending as well as deposit rates, stating higher deposit rates have pushed up lending rates as well.

Higher lending rates, according to the FNCCI, have troubled the manufacturing and other productive sectors.

The Confederation of Nepalese Industries, another business lobby group, on the other hand, has argued that putting a cap on interest rates is against the principle of market economy.

“The interest rate volatility is the result of liquidity crunch.

This calls for promotion of activities to enhance capital formation rather than government intervention,” said CNI President Hari Bhakta Sharma.

The two business lobby groups expressed divergent views on government intervention in interest rates during a meeting called by the Ministry of Finance today.

The ministry had invited representatives of the private sector to the meeting after Prime Minister KP Sharma Oli, under pressure from a group of industrialists, on Saturday called on finance minister and central bank governor to look into the issue of soaring lending rates.

During today’s meeting, Finance Minister Yuba Raj Khatiwada suggested that the central bank take necessary steps to reduce the interest rate volatility in the banking sector without affecting both the private sector and banks and financial institutions.

“I expect the central bank to find a middle way which will create win-win situation for both industrialists and bankers,” said Khatiwada, adding, “The government has already started implementing recommendations submitted by a committee formed to suggest ways to address the interest rate volatility.

The implementation of measures recommended by the committee will gradually bring down the interest rates and ensure interest rate stability.”