Pashupati Murarka
President, Federation of Nepalese Chambers of Commerce and Industry (FNCCI)
NRB's monitory policy for Fiscal Year (FY) 2015/16 is good as it has set a basis to establish infrastructure bank by setting a paid-up capital of Rs 20 billion. Likewise, the projected inflation rate seems achievable as price of commodities, including fuel, is on a declining trend. However, the problem with monetary policy is the decision to raise paid-up capital of commercial banks to a huge Rs 8 billion. The decision seems impractical and has been made with a motive of force merger among banks. Similarly, the timeframe of two years to raise capital base is too short.Inflation target not gettable
Deependra Bahadur Kshetry
Former Governor, Nepal Rastra Bank
We have not been able to achieve inflation targets so far. The case will be the same this year as well. Inflation target will not be achieved as overall production is sure to fall and economic activities are still affected. Likewise, industrial growth will also decline. Rise in import will lead to a state of uncontrolled price rise in the market. The wage rate will definitely increase with the need for more workforce for reconstruction.
Deadline to raise capital requirement difficult to meet
Upendra Poudyal
President, Nepal Bankers Association
The decision to jack up paid-up capital of commercial banks is a good step toward financial consolidation of the banking system. However, the two-year deadline to meet the minimum capital requirement is very short and hence difficult to meet. One of the options to raise the capital is from additional investment from promoters. However, as most of the promoters are putting their all resources in the banks for maximum utilization of the funds, they might not be interested to pour further money. The central bank should have allowed the banks to use their reserves for meeting the capital requirement. Merger and acquisition is another option. However, it is not going to be a cakewalk. Banks should find an appropriate partner to go for merger which is not easy. It needs some time, say four to five years, to find a partner and harmonize everything, from staff to balance sheets. The monetary policy will compel the banks to undergo merger and acquisition in a speedy process which might post them to risks.
It won't be difficult for banks to meet new capital requirement
Min Bahadur Shrestha
Spokesperson, Nepal Rastra Bank
The capital increment requirement for BFIs has been introduced following a long study and assessment by the central bank. We had first tried to gradually enforce the capital raise plan some seven years ago. However, we were compelled to roll back the plan. Now, we have included the plan in the monetary policy. It won't be difficult for BFIs to meet the new capital requirement within two years if they try to go for merger and acquisition or seek new investors. We have seen long queues of investors during primary issues which means that there is a larger capital prospect. The central bank is determined to implement the minimum capital requirement and it will not be rolled back. The NRB leadership brought this capital requirement plan by weighing all economic and financial factors as well as its earlier experience of capital increment implementation plan. If BFIs raise their capital base, it will enhance their investment capacity.
BFIs will be compelled to go for mergers, acquisitions
Yuvaraj Khatiwada
Former Governor, Nepal Rastra Bank
The new monetary policy has continued my orientation of keeping inflation disciplined while helping the growth through credit flow in productive sectors. The new governor has shown his wit by not listening to the pressure of omitting spread rate in interest rates, increase CRR as well as relaxing mandatory lending provision in agriculture and energy sector. The decision to raise paid-up capital of BFIs might have surprised many. Paid-up capital has to be increased, but not with such haste. BFIs will have a compulsion to go for merger and acquisition has they need to inject a combined Rs 100 billion within two fiscal years. They are going to need a huge capital injection as their annual profit stands at around Rs 30 billion. We have to see how the capital market will absorb the huge capital injection.
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