KATHMANDU, July 21: Nepal Rastra Bank (NRB) officials have confirmed that they have finalized the preparation for the monetary policy for fiscal year 2024/25 and are all set to unveil it on Sunday.
Prakash Kumar Shrestha, executive director of the Economic Research Department of the NRB, said that the central bank has completed the draft of the policy. According to him, the NRB board meeting held on Friday finalized the policy.
The central bank was all set to announce its monetary policy for the next fiscal year on Friday. However, it was put on hold mainly due to the new political development.
Revised interest rate corridor system introduced
At a time when stakeholders have been complaining that the budget for the next fiscal year has failed to address their problems, they have turned to the NRB with long wishlists. The NRB officials said the central bank has received overwhelming expectations from the people representing various segments of the economy.
Although a positive vibe has been observed in the country’s share market in the past few days, the majority of the internal economic indicators are not positive. The aggregate demand in the domestic market has fallen largely while the realty sector is almost stagnated.
Banks are piled up with excessive liquidity; however they are unable to expand their businesses due to multiple reasons including investors’ low confidence, soaring bad debt and the issue related to capital adequacy funds. As a result, banks and financial institutions (BFIs) increased their private sector lending by only around half of the target of 11.5 percent maintained by the central bank.
The NRB source said the central bank will be turning more flexible to consider restructuring loans taken by the business entities, citing a rise in cases of loan defaulting that have led the banks to face increasing bad debts. Due to growing cases of loan defaulting, banks are reported to have faced non-performing loans as high as around five percent.
The upcoming monetary policy is bringing in measures to promote cross-border online payment with India and third countries. Speaking at a program, NRB Governor Maha Prasad Adhikari already said that the central bank will facilitate a digital payment system to ease cross-border financial transactions.
Targeting to facilitate small businesses, the NRB has permitted them to take working capital loans of up to Rs 40 million. However, the central bank has been facing pressure to show more flexibility on working capital loans, while it has already revised its policy accordingly.
