In case of fixed deposit, the central bank has instructed them not to renew the accounts once the maturity period ends.[break]
The provision has shut the doors for banks from making easy income and compelled them to invest deposits that they mobilized, if they really want to generate returns.
According to an estimate, banks currently have some six billion rupees in deposits in other banks and financial institutions. So, effectively, the provision will liberate substantial money in the system for lending, thereby easing access to finances. Till recently, banks had largely squeezed their lending on the bank of liquidity crunch.
Issuing fresh directives to enforce the policies adopted in the new Monetary Policy, NRB Tuesday opened export refinance facility to export-oriented cottage and small industries as well. It left special refinance rate for export industries, sick industries, cottage and small industries and targeted groups pursuing foreign employment unchanged at 1.5 percent.
It has also sought the banks and financial institutions to establish a separate micro-credit desk in a bid to increase access and flow of loans to cottage, small and medium scale industries.
The central bank has also imposed new ceiling on the loans exposure for banks and financial institutions. Under this, BFIs loans exposure in any given sector must not exceed 40 percent of their total lending.
“In case of sectors in which loans exposure has been capped below 40 percent, the previous instruction will continue to prevail,” reads the new directives, mainly referring to realty sector loans, wherein it has asked BFIs to gradually lower their loans exposure, ultimately bringing it down to 25 percent by the end of the next fiscal.
NRB has further tightened loans facility enjoyed by promoters and asked banks to issue term receipt (TR) loan and other import loans for a maximum of 120 days only.
The new directives have made it mandatory for banks and financial institutions to get prior approval of NRB for opening new branches. Also, banks and financial institutions aspiring to add a new branch in the Kathmandu Valley will now need to open two branches outside the Valley.
But if commercial banks and national-level development banks open branches in district headquarters of the 22 remote districts, the central bank has said it will provide zero-interest loan of up to five million rupees for meeting operating expenses. “If they open branches out of district headquarters, they will enjoy zero-interest loan up to Rs 10 million,” says the new directives.
NRB did not change statutory liquidity ratio (SLR), cash reserve ratio (CRR) and cash at vault rates. However, it said it would henceforth calculate CRR and cash at vault as components of SLR.
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