NRB to suggest investment avenues to BFIs

KATHMANDU, Jan 17: As commercial banks lagged behind in raising credit to the level that they mobilized deposits, Nepal Rastra Bank (NRB) is finally ready with a list of areas that it is likely to suggest banks and financial institutions (BFIs) to invest in.



The new areas will be related to the productive sector, said NRB Governor Dr Yuba Raj Khatiwada, adding that the central bank is thinking to suggest the sectors for investment mainly as part of its Monetary Policy announcement, which pushed BFIs to double their investments in productive sector within 3 years.[break]



"The areas will be broadly related to priority sectors like agriculture, energy and tourism, among others," said Dr Khatiwada. With the new initiative, he expressed hope the BFIs will be able to effectively deal with present credit crunch.



Referring to record balance of payments surplus and forex reserves, Dr Khatiwada said the economy over the last six months has strengthened and become more stable. "This has laid down a foundation, whereby the country can target strong growth rate. However, the country must seriously work to do away with structural constraints like power crisis and labor problems to take benefit of such favorable condition," Dr Khatiwada stated.



According to NRB, commercial banks have mobilized Rs 63 billion in deposits in the first six months of this fiscal year. However, their credit flow during the period stood at Rs 25 billion.



Basically, the banks should have worked innovatively in identifying new avenues of investment when traditional avenues are closed. Sadly, they are lagging behind in doing so, said Governor Khatiwada.



Interacting with a group of journalists, Dr Khatiwada said the central bank has already provided enough relaxations to housing developers and real estate dealers. Referring to its recent decision, which excluded personal loans up to Rs 10 million from ´real estate´ loans, Khatiwada opined it would relieve both bankers and developers.



With central bank´s fresh offers, he argued BFIs can issue more home loans, enabling housing developers that have absorbed as much as Rs 30 billion loans from the banking system to repay their loans.



However, he indicated the central bank is not worried about real estate dealers who made speculative investments eyeing handsome returns and buoyed the property prices unnaturally. "They took risks. NRB cannot do anything to such risk takers," he stated.



Governor Khatiwada even said the realty market is currently bearing the pain of self-correction. "Aspiring land buyers are demanding the existing overpricing to correct. Land dealers, on the other hand, are refraining from letting the prices go down. The market is negotiating. Prices will go down eventually," he stated.

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