KATHMANDU, JULY 23
The Monetary Policy 2023-24, unveiled by the Nepal Rastra Bank today, has received mixed reactions from the private sector, with most stakeholders expressing doubts about its effectiveness in addressing the current challenges faced by the banking sector.
Amit More, speaking on behalf of the Confederation of Nepalese Industries (CNI), expressed concerns that the Monetary Policy does not appear to be sufficiently economic-friendly and fails to recommend effective ways to tackle the current economic situation in the long run. While the policy is geared towards achieving the growth targets set by the federal budget and control inflation, it lacks measures that directly support the private sector.
"For instance, the central bank has mentioned reviewing the working capital loan guidelines, but doubts remain about whether this revision will be implemented.
Furthermore, there is lack of focus on improving loan provisions and the policy has instead relied on monitoring large loan borrowers, which does not seem to foster a private sector-friendly environment."
More emphasised that the Monetary Policy's commitment to boosting the morale of the private sector seems insufficient until specific directives are issued.
Thus, the private sector is adopting a 'wait and watch' approach to see how the policy will effectively address the current problems, he said.
Similarly, Rajendra Malla, president of Nepal Chamber of Commerce (NCC), also voiced concerns about the Monetary Policy's inability to provide a clear path for the economy despite being more relaxed compared to the previous fiscal year. While there are positive aspects, such as reducing risk weight on loans towards the share market, auto, and real estate, and reviewing working capital loan guidelines, the NRB's control of credit flow and the lack of measures to reduce banking and base rates are seen as hindering the achievement of the targeted six per cent economic growth.
Binayak Shah, president of Hotel Association Nepal (HAN), expressed deep disappointment with the Monetary Policy's failure to acknowledge the hotel industry as a national priority sector despite the significant investment and substantial contribution to foreign currency earnings and employment generation.
Shah opined that the Monetary Policy has missed a crucial opportunity to support the hotel industry by not addressing the issue of high interest rates. "By reducing the interest rates, the policy could have made the business environment more favourable for investment and provided much-needed relief to hotel entrepreneurs grappling with financial challenges."
Meanwhile, Dhurva Bahadur Thapa, president of NADA Automobiles Association of Nepal, termed the Nepal Rastra Bank's initiative to reduce the risk weight to 150 per cent on auto loans of up to Rs 2.5 million as 'positive'. He expressed his belief that this move will have a positive impact on the automobile sector.
However, Thapa pointed out that the threshold of Rs 2.5 million for the reduced 150 per cent risk weight may not be applicable to mid- and higher range automobiles.
"This means that the relief provided by the reduced risk weight will primarily benefit entry-level automobiles.
While this is still seen as a positive step for the industry, there are concerns about the lack of similar benefits for mid and higher range vehicles."
Chhote Lal Rauniyar, immediate past president of the Nepal Investors Forum (NIF), expressed positivity regarding the indicated changes in the Monetary Policy. He noted that the policy's decision to reduce the risk weight to 100 per cent for loans of up to five million rupees is a positive step. This reduction in risk weight will likely make it more feasible for individuals and businesses to access loans up to the specified amount.
Additionally, Rauniyar appreciated the policy's attention to addressing the risk weight rate and the cap of Rs 120 million set on the limit of margin loans.
A version of this article appears in the print on July 24, 2023, of The Himalayan Times.
