So far, Nepal Rastra Bank (NRB) has been making the purchase of IC from the Reserve Bank of India and regulating its supply in the market. [break]
However, Nepal Bankers´ Association (NBA) has pushed for relaxation of the existing NRB policy, arguing that the shortage has seriously jeopardized trade financing and hurt their operations badly. Even the general travelers and consumers along the border are facing trouble to fulfill their requirement.
“This unfortunately has created black market of IC, which is pretty unnecessary,” said NBA President Ashok Rana.
If NRB opened IC purchase, NBA has promised that it would report to the central bank all details related to sources of purchase, volume of purchase and sales. “We have that proposed measures will help check possible anomalies as well,” Rana said, expressing hope that the central bank would be convinced with its commitments.
IC has been in short supply since than a year, largely due to widening trade deficit with the southern neighbor. But the shortage has deepened severely since last three months, particularly as its demand surged to finance illegal imports, particularly that of gold.
As a result, the exchange rate of IC in the informal market has jumped to Rs 165 per IRs 100 - Rs 5 higher than the official rate fixed by the central bank.
Although the NRB directive allows banks to provide exchange facility of up to IRs 25,000 in a day or a maximum of IRs 200,000 in a month to a party, bankers said the central bank has curtailed supply such sharply that they are not in a position to fulfill even the minimal IC demand.
Apart from relaxation on policy of IC purchase, NBA has also urged the central bank to revise its provision on credit-deposit (CD) ratio and provision on realty loans exposure.
“There is no doubt the provisions set by the central banks on both the issues are good and will bring good results. However, we feel there should be certain relaxations as stringent CD ratio is limiting banks´ ability to lend,” said Rana.
Going by the NRB provision, the commercial banks will need to maintain their CD ratio at 85 percent by the end of the current fiscal year and 80 percent by the next fiscal year. Likewise, under the guidelines on realty loans exposure, the central bank has asked the commercial banks to cap their lending on real estate and housing to 25 percent of the total loans portfolio.
The guideline was enforced in January last year in a bid to cool the overheated realty market. However, the bankers said the provision has forced them to tighten their lending in the sector such severely that they feel it could affect their loans recovery.
“The objective of the central bank behind enforcing this rule was to safeguard the banks´ financial health. But if the provision itself created jeopardy, threatening to hurt the banks´ financial health, it will be unfortunate,” Rana said at an interaction with a group of journalists.
“Hence, we have pushed for the relaxation.”
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