Interestingly, even the financial institutions that are relatively at ease approached the central bank for the facility. The chief executives of such FIs argued they also need the facility to keep a cushion in case of need.[break]
“The entire financial sector is under severe stress. All finance companies are in need of refinance support if they are to function normally,” said Rajendra Man Shakya, president of Nepal Finance Companies´ Association.
That is not all. Top brass of finance companies that met with the senior NRB officials on Monday and Tuesday even pressed the central bank to waive off penalty that it slaps on them for their failure to maintain Cash Reserve Ratio (CRR) and Statutory Liquidity Ratio (SLR).
“If FIs are failing to comply with CRR and SLR provisions, it is because of existing special circumstances. Hence, we have requested the central bank to treat the case differently,” Shakya told Republica.
Amid deepening liquidity crisis, about half a dozen financial institutions have already failed to comply with the CRR provision. Officials of more than a dozen FIs said they would rather pay penalty later than complying with the NRB directives now.
Chief executives of the financial institutions even argued that the situation in the market was volatile and urged the central bank to open special refinance to all the FIs.
However, the central bank officials refused to open special refinance to all the FIs.
“The facility is a special window opened only for liquidity-strapped institutions. We will provide the facility only after going through their latest financials and books of accounts,” NRB Spokesperson Bhaskar Gyawali told Republica.
Instead of relying on emergency bailout measures, NRB officials suggested the FIs to step up their initiatives to mobilize more deposits and manage liquidity through liquidation of speculative loans.
Nonetheless, NRB has provided refinancing under the special window to four financial institutions so far. However, officials chose not to disclose the names of those institutions saying that it might negative signal in the market.”
Top brass of FIs have also exerted pressure on the central bank to ease the procedures so that refinancing could be disbursed at earliest.
“The very motive of the special window is to address the liquidity problem promptly. It will be meaningless if the disbursement of finances took weeks,” said Shakya.
Given the gravity of the situation, the central bank has promised to step up inter-departmental coordination and ease procedures to ensure early disbursement of refinance.
“If we are assured that good loans pledged by FIs for collateral is good, we will release the money within three days of receiving application from the FIs,” said the NRB source.
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