Private sector seeks interest rate stability

Kathmandu, July 4

As Nepal Rastra Bank (NRB) is preparing to unveil the Monetary Policy for fiscal year 2019-20 next week, the country’s private sector has said that the policy should primarily focus on ensuring stability in the banking interest rate and promoting business growth.

Citing that the interest rate volatility is the major impeding force behind growth of business and investment in Nepal at present, the Federation of Nepalese Chambers of Commerce and Industry (FNCCI) — the umbrella body representing the private sector — has urged the central bank to bring down the banking interest rate to a single digit, which is currently above 13 per cent.

FNCCI recently submitted a 21-point suggestion on the upcoming monetary policy to the central bank.

“As the banking interest rate is too high in the country, this instability has been discouraging the business community which will certainly impact the economy. As the government has been saying it will prioritise and promote business, it should first address different doing business issues, including the volatile interest rate,” said Bhawani Rana, president of FNCCI.

Meanwhile, the private sector has also urged the central bank to bring down the interest spread rate to three per cent from the existing 4.5 per cent citing that high interest spread even after all commercial banks have already fulfilled the paid-up capital requirement of Rs eight billion is unjustifiable.

Similarly, FNCCI has also asked NRB to make contextual all parameters that are used while calculating the base rate, ensure access of every citizen to banking and financial services, and widen the refinancing pool to Rs 100 billion from the existing Rs 50 billion, among others.

The private sector has also asked the central bank to introduce mandatory provision for banks and financial institutions to make them invest at least 15 per cent of their total loan portfolio in the energy sector. Moreover, FNCCI has asked the NRB to fix interest rate on energy sector as ‘high and unstable interest rate will raise the production cost and extend the payback period of hydropower projects’.

Meanwhile, NRB officials said the monetary policy will be based on the budget speech for next fiscal and try to address key concerns of the private sector and the entire economy. “We have been taking inputs from different stakeholders and will try incorporating them in the monetary policy,” said Laxmi Prapanna Niroula, spokesperson for NRB.