As most BFIs become reluctant to pursue mergers and acquisitions (M&A) against the implicit interest of the central bank while raising the minimum paid-up capital requirements by four-fold, it has started consultation over policies to push BFIs to go for merger.
KATHMANDU, June 27: Nepal Rastra Bank (NRB) is preparing to unveil monetary policy for the upcoming fiscal year next week.
According to officials of the NRB, the central bank is at the final stage of preparing the draft of monetary policy for Fiscal Year 2018/19. A senior official at the NRB told Republica that various departments of the central bank have already submitted the Research Department their suggestions to be incorporated in the monetary policy.
The central bank was planning to unveil the monetary policy this week. However, it didn't happen as the board of directors (BoD) of the central bank couldn't convene to approve the monetary policy draft because Finance Secretary Rajan Khanal was in China as a member of the Prime Minister Khadga Prasad Oli's entourage. Khanal is a member of the 7-member board of the central bank that is authorized to frame and approve the monetary policy before it is made public.
The SAARC Governors' Meeting scheduled to be held on Wednesday in Kathmandu has further delayed the monetary policy launch. The meeting, which is being attended by central bank governors of SAARC countries along with Iran and Myanmar, will conclude on Thursday.
“The board of the NRB is yet to be convened. If the board meeting is held early next week, the monetary policy, depending on how long the deliberations will go in the board, will be released by the end of the week,” said Narayan Prasad Paudel, the spokesperson for the NRB.
According to a source at the NRB, the central bank is also considering the budget of provincial and local governments this time while formulating the monetary policy. “The spending of the local governments will also put an upward pressure on inflation. We have to take into consideration how that will impact monetary issues,” said the source.
Apart from maintaining interest rate stability, the central bank is also said to be mulling over policies to prod bank and financial institutions (BFIs) to undergo merger.
As most of the BFIs become reluctant to pursue merger and acquisition (M&A) against the implicit interest of the central bank while raising the minimum paid-up capital requirements by four-fold, it has started consultation over policies to push BFIs to go for merger. However, officials of the central bank are tight-lipped on the issue.
Many banking executives have also expressed their interest to support the central bank on its policy on M&A. “If the central bank brings something on promoting merger, we are ready to support the central bank. In fact, we believe this is the right time to do so,” said Gyanendra Dhungana, while addressing an interaction organized recently by Management Association of Nepal.