NRB turns flexible on threshold for capital adequacy of banks

Published On: February 12, 2024 09:20 PM NPT By: Republica  | @RepublicaNepal

Through revising ‘regulatory retail portfolio,’ central bank targets to minimize pressure on capital adequacy fund

KATHMANDU, Feb 12: At a time when banks have been experiencing an increasing pressure in their capital adequacy fund, Nepal Rastra Bank (NRB) has introduced measures to address the issue through the mid-term review of the Monetary Policy 2023/24.

Unveiling the monetary policy review on Monday, the NRB has allowed banks to consider the credit of up to Rs 20 million provided to agriculture and small, cottage and medium enterprises under the ‘regulatory retail portfolio.’ As of now, the threshold under the heading was maintained at just Rs 10 million.

According to bankers, the credit considered under the regulatory retail portfolio carries only 75 percent of the risk weightage, which could help reduce the pressure on the capital adequacy fund. Bankers have been demanding the central bank to increase the threshold of the regulatory retail portfolio to Rs 30 million.

Likewise, the NRB has permitted banks to maintain a difference of the interest rates on fixed accounts of the institutional deposit and individual deposit at up to one percent. As of now, the interest rates on institutional fixed deposits should be two percent less than the interest earnings on the personal deposit in the category.     

The central bank, however, has left unchanged the policy rates including the cash reserve ratio and statutory liquidity ratio. The provisions under the interest rate corridor have also been left the same. 


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