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They also raised concerns for not addressing the deposit issues properly to ease the liquidity crunch. BFIs were demanding additional incentives for mergers, citing additional costs involved in the merger now. [break]
Speaking at a program organized by Society of Economic Journalists of Nepal (Sejon) on Friday, President of Development Bankers´ Association Manoj Goyal said it is very necessary to establish a separate unit to address merger issues. “Different institutions will have different problems while entering into merger and the problems are to be addressed differently,” he said adding that it was disappointing that new monetary policy failed to include any of these issues.
Ashoke Rana, president of Nepal Bankers Association, opined that along with merger issue, monetary policy should have addressed deposit issues by providing a mechanism for deposit incentives. “Although commercial banks have expanded to over 500 branches, there has been no growth in deposit,” he said. Many BFIs entered the market around the same time last fiscal year and their only target was corporate depositors, which were the only beneficiaries of the competitive market.
He further added although the decision to insure depositors of commercial banks was an encouraging step, the interest rate of 0.2 percent was high.
The new monetary policy has asked all commercial banks to insure their deposits up to Rs 200,000 starting from the current fiscal year. Previously, it was mandatory for development banks, Finance companies and micro-finance institutions only to insure the deposit up to the same amount.
In one of the measures of liquidity management, the central bank has slashed the Cash Reserve Ratio (CRR), which officials of finance companies said was simply going to help BFIs with higher deposits, mainly commercial banks. “Liquidity problem is acute in finance companies and a cut in CRR is not going to impact finance companies much,” CEO of IME Financial Institution Yogeshwor Dhakal said.
BFIs have welcomed the decision of Nepal Rastra Bank (NRB) to relax foreign exchange facility and the provision which allows non-resident Nepalis to hold dollar accounts. President of Nepal Finance Companies Association, Rajendra Man Shakya, said, “Allowing NRNs to hold account in Nepal can definitely ease liquidity crunch,” he further suggested to relax the cap on real-estate lending.
Other concern of bankers was over-investment in productive sector. They said although the new monetary policy has encouraged investments in the productive sector, it failed to provide necessary guidelines.
“Problems related to investments in the productive sector has not been addressed. This is not going to encourage BFIs to increase their investment,” Goyal said. He added that the policy should have come up with interest-subsidy fund to encourage private sector in infrastructure development.
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