“Cut in cash reserve ratio (CRR) and various measures adopted for liquidity management are welcome moves,” and Ashoke Rana, the president of Nepal Bankers´ Association. This will greatly relieve the banks and financial institutions (BFIs) still reeling under liquidity crunch, he added. [break]
That is not all. The bankers said the cut will instantly release over Rs 4 billion in the market which will help them make additional investments in small and medium enterprises.
He also appreciated the central bank´s decision to strengthen self-governance in the financial system through introduction of stress tests.
“This will enable BFIs judge their capability to withstand all possible adversities, thereby compelling them to take necessary corrective actions before situation actually turns unfavorable,” he said.
Jhapat Bohara, former president of Development Bankers´ Association said the direction in which the new monetary policy has tried to lead the BFIs was good.
However, he raised question over whether it would bring about instant positive changes in public perception toward BFIs, which is much-needed to increase deposits and address liquidity crunch.
In the same note, some of the bankers also flayed the decision of the central bank to leave the penal rate, which it imposes while issuing finances to the BFIs, unchanged. NBA had requested the central bank to slash the penal rate to 2 percent from existing 3 percent of over 91-day Treasury Bill rate or bank rate, whichever is higher. “This has dampened the prospect of lending rates going down for productive sectors, including small and medium enterprises,” said a banker requesting not to be named.
President of Nepal Finance Companies´ Association Rajendra Man Shakya, meanwhile, expressed dissatisfaction with the central bank for not providing additional incentives for merger. The association had strongly demanded the central bank as well as the government to provide tax incentives so that BFIs could adjust staff with relative ease. It had also sought for additional incentives from the central bank.
“However, our concern was neither addressed by the budget nor the monetary policy,” he stated. CEOs of finance companies said that both the budget and monetary policy have failed to unveil measures that would boost confidence of depositors in the market.
“NRB´s decision to relax capital requirement for opening branches in rural areas is welcome step though,” said Shakya.
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