Pvt sector urges central bank to reduce CRR

Kathmandu, June 25

The private sector has urged Nepal Rastra Bank (NRB) to reduce the cash reserve ratio (CRR) for banks and financial institutions (BFIs) by one per cent through the Monetary Policy for next fiscal.

NRB is preparing to unveil the macro-economic policy for the next fiscal in the second week of July.

Providing its suggestions to NRB today on the upcoming Monetary Policy, officials of the Confederation of Nepalese Industries (CNI) — an umbrella organisation of domestic service and manufacturing industries — said that reduction in CRR for banks and financial institutions will help to address the ongoing credit crunch in the financial market of the country.

CRR refers to the minimum percentage of the total deposit of customers which banks and financial institutions have to hold as reserve either in cash or as deposit with the central bank. Currently, the central bank has fixed CRR at six per cent for commercial banks, five per cent for development banks and four per cent for finance companies. CNI wants NRB to slash the CRR for all the banks and financial institutions by one per cent.

CNI also proposed for the funds to be mobilised through the financial system if the government has treasury surplus of above 10 per cent of the budget to prevent credit crunch in the domestic market.

Similarly, CNI also urged the central bank to increase access of small and medium enterprises in the capital market to ensure the growth of the domestic economy. “Nepal is witnessing economic growth today while a majority of the big economies across the world are facing problems. This is an opportunity for Nepal to grow and this growth can be ensured if small and medium enterprises are welcomed in the capital market,” Hari Bhakta Sharma, president of CNI, said.

Citing that the unpredictability of financial cost has been a major setback for industrial growth in Nepal, CNI said that NRB should also introduce provisions in the Monetary Policy that ensure stability in the interest rate for loans that banks and financial institutions issue to domestic businesses.

Meanwhile, CNI has also urged the central bank to raise the quantum of advance payment on import of goods to $100,000 from the existing $50,000. Similarly, CNI also requested the central bank to introduce cheque clearance facility in all banks and financial institutions for six days a week from the existing five days.

Industrialists also said that NRB should take initiatives and promote cashless transaction in every sector to transform the domestic economy into cashless economy.

Meanwhile, NRB officials have said that the upcoming Monetary Policy aims to sustain the current economic growth and facilitate private sector. Informing that structural reforms along with friendly Monetary Policy are required to sustain growth, Nara Bahadur Thapa, executive director of NRB said, “A coordinated effort is required to improve the financial technology (FinTech) in the country to bring down cost of operation.”

Similarly, Thapa also informed that NRB will ensure rights of creditors and consumers through the Monetary Policy.