Private sector hails revised monetary policy for FY 2023/24, express doubt over proper implementation

Published On: December 9, 2023 07:50 PM NPT By: Republica  | @RepublicaNepal

Revised monetary policy can help banks reduce interest rates, most likely from next month: Bankers

KATHMANDU, Dec 9: The private sector welcomed the first quarterly review of the monetary policy for the current fiscal year unveiled by Nepal Rastra Bank (NRB) on Friday.

Through the revised monetary policy, the NRB has decided to reduce the risk weight of real estate loans and maintain the risk weight for share mortgage loans exceeding Rs 50 million at 125 percent. Similarly, the central bank has reduced the bank rate from 7.5 percent to 7 percent, while the policy rate has also been revised to 5.5 percent from the existing 6.5 percent.

Chandra Prasad Dhakal, president of the Federation of Nepalese Chambers of Commerce and Industry (FNCCI), said the revised monetary policy, if properly implemented, will create a positive vibe in the market. “The central bank’s move for restructuring and rescheduling of the credit till April-end is a commendable step towards revitalizing the economy,” he said.

Formation of an advisory committee for monetary policy that will comprise experts from the private sector and commitment for restructuring and rescheduling of the credit through bilateral accord between the borrowers and the banks concerned are among the positive moves of the NRB, according to Dhakal.

Rajesh Agrawal, president of the Confederation of Nepalese Industries (CNI), said the reduction in policy rate will force the banks and financial institutions to lower their interest rates as well. “However, it is yet to see the implementation side of the revised policy,” he said.

Agrawal sought the central bank’s intervention on the provision that allows banks to revise only up to 10 percent of their existing interest rates at once.   

Shares investors said the revised monetary policy is expected to inject some hope among the investors, who have lost confidence in the country’s stock exchange market. Through the monetary policy, the NRB has revised the cap on the risk weightage on the loans against shares worth over Rs 5 million from 150 percent to 125 percent.  

Rajan Lamsal, vice-president of the Nepal Investors’ Forum, said the monetary policy has addressed only nominal issues underlying the country’s stock exchange market. “However, it is expected to take the financial market in a positive line,” Lamsal added.

Sunil KC, president of Nepal Bankers’ Association, said the revised policy rate and bank rate will aid in reducing the banks’ interest rates. “Amid already declining interest rates, the new provision will help reduce interest rates further,” KC said. 

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