The CRR provision will compel the BFIs to make investments only in the productive sectors that ensure employment opportunity and stimulate the domestic economy

Private banks and financial institutions (BFIs) have urged Nepal Rastra Bank (NRB), the central bank, to reduce Cash Reserve Ratio (CRR) by one percent through the monetary policy for the next fiscal. The BFIs argument is that if the CRR is reduced by one percent they will be able to circulate more money in the market, and it will address the liquidity crunch faced by the market. The NRB is preparing to unveil a macro-economic policy for the next fiscal. The BFIs officials have suggested that NRB reduce the CRR that will address the cash crunch in the financial sector currently faced by the service and manufacturing industries. CRR is a provision in which commercial banks (A-Class), development banks (B-Class) and finance companies are required to deposit six, five and four percent of the depositors’ money, respectively, at the NRB account. The BFIs have said such money to be deposited at the NRB will remain idle and the central bank must show flexibility by reducing CRR by one percent which, they argue, will not affect the financial health of the country.

The Confederation of Nepalese Industries (CNI), an umbrella organization of domestic service and manufacturing industries, has also proposed funds to be mobilized through the financial system if the government has a treasury surplus of above 10 percent of the budget to prevent credit crunch in the market. The CNI has also urged the NRB to increase access of the small and medium-scale entrepreneurs in the capital market so that they can also contribute to the domestic economy. After the government somehow addressed the problem of energy crisis and the political situation has gradually returned to normalcy through periodic elections, Nepal’s economy has witnessed moderate economic growth recently. The CNI representatives have also urged the NRB to come up with a policy addressing the unpredictability of interest rate of the loans the BFIs issue to domestic businesses and raise the quantum of advance payment on import of goods to US$ 100,000 from the existing US$ 50,000.

The NRB officials have assured the CNI representatives that the issues that they have raised will be addressed duly but kept mum on their demand that CRR be reduced. NRB officials’ line of argument is that the percentage fixed for CRR for three types of BFIs is to protect the fundamental interests of the depositors and to maintain financial health of the BFIs. They have argued that reducing the CRR by one percent will not make substantial difference when it comes to lending money in the domestic market. The CRR provision was also introduced to discourage the BFIs from lending money in unproductive sectors such as hire purchase, land pooling, purchasing of cars and expensive electronics gadgets. This provision will compel the BFIs to make investments only in the productive sectors that ensure employment opportunity and stimulate the domestic economy, ultimately helping growth of export-oriented industries. The NRB must address some genuine concerns of the business community such as raising the quantum of advance payment of import of goods. The NRB must do homework to transform the domestic economy into cashless as done by other countries.

Medicine abuse

Many pharmacies are found to be selling medicines without the required prescription. This practice should be brought to an immediate halt. Moreover, patients are often found taking medicines on their own. The prescription drugs are supposed to be sold by the pharmacies only as per the recommendation of doctors. Self prescription should not be encouraged under any condition.  Medicines such as contraceptives, abortion pills, antibiotics and pain killers are being sold without prescription. Irrational use of medicines should be discouraged. In practice the patients should be receiving the appropriate medicines in the recommended doses.

As per the World Health Organization the drugs should be prescribed for an adequate period of time and at the lowest cost possible. Even medicines categorized as essential are found to be very expensive in Nepal. Worldwide, over half of all medicines are prescribed, dispensed or sold in an inappropriate manner. It is shocking to learn that half of the patients globally do not take the medicines as prescribed. This has led to various complications through the overuse of drugs such as antibiotics and injections.