‘Recommendations for policy, structural reforms will be made’

KATHMANDU, Dec 16: The committee formed by the Ministry of Finance (MoF) to look into the recent instability in the financial sector is preparing to submit its report on Monday.

Though the committee headed by Nepal Rastra Bank’s Deputy Governor Shiva Raj Shrestha was asked to submit its findings and recommendation within seven days (by Sunday), it is yet to complete its consultations with all stakeholders about the recent volatility of the financial market. 

The committee was formed by the MoF through a minister-level decision on December 7 to look into the overall trend of financial and capital markets in recent time and make recommendations to the government for maintaining financial stability and addressing problems related to investment for the industrial sector and capital market.

“We have already completed report writing about capital market. But we are yet to hold discussions with stakeholders like contractual deposit organizations and cooperatives on coming up with recommendations for financial reforms,” said Shrestha. “We plan to complete the report by Monday and then we submit it to the Finance Minister,” he added. 

According to Shrestha, the committee will recommend the government policy reforms and structural reforms needed to strengthen the financial sector and end volatility in the capital market. 

Among others, the committee is recommending the government to increase the ceiling of the loan to value ratio on margin lending. The new relaxation will allow share investors to get more loans from the bank and financial institutions against the collateral of their stocks. According to the existing provision, BFIs are allowed to provide margin loan against the collateral of shares only up to 50 percent of the average closing price for the last 180 days or the prevailing market value. 

However, one of the members of the committee told Republica that the committee may seek an extension of the deadline as the time provided for them is very short. 

“We are making efforts to submit the report within seven working days. But, it looks the time frame will be short. So, we may request an extension of the deadline by one or two days if we do not complete the report by Monday,” the member told Republica, requesting anonymity as he was not authorized to talk with the media about the committee’s internal deliberations. 

Representatives of Securities Board of Nepal (Sebon and organizations of stock investors, president of Nepal Bankers Association and joint secretary of the MoF are members of the committee. 

The committee has already held discussions with NRB, Sebon, Federation of Nepalese Chambers of Commerce and Industry, Confederation of Nepalese Industries, organizations of stock investors and other stakeholders, according to the committee’s coordinator Shrestha. 

Finance Minister Yuba Raj Khatiwada’s initiative to form the committee came in the wake of skyrocketing interest rates of the bank and financial institutions which has not only sent stocks downward but is also going to raise the cost of borrowing for businesses and the private sector.

 
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