Monetary Policy 2021/22

Provisions made in the mid-term review won’t solve persisting liquidity crisis: Private sector

Published On: February 19, 2022 07:00 PM NPT By: Republica  | @RepublicaNepal

KATHMANDU, Feb 19: Private sector has expressed its skepticism that the mid-term review of monetary policy may not help solve existing liquidity crunch in the banking system as the revised policy has mostly focused on enforcing short-term instruments rather than introducing measures to ensure long term solutions.

Issuing press release, two umbrella organizations--Federation of Nepalese Chambers of Commerce and Industry (FNCCI) and the Confederation of Nepalese Industries (CNI)—have said that the policy endorsed by the Nepal Rastra Bank (NRB) has only focused on increasing lending interest rate despite knowing the fact that an increase in interest rate of banks’ deposit in the past few months has not helped improve the fund collection in banks. “It is likely to increase the cost of capital to adversely affect businesses and even the banks and financial institutions,” reads the press statement issued by the FNCCI.

According to FNCCI, NRB’s policy to reduce overall imports will negatively impact production, revenue collection and employment generation along with boosting inflation. “Reduction in imports by neglecting promotion of exports and other measures to invite more foreign currency could result in the illegal trading along with taking the prices in upward graph,” FNCCI said.

Likewise, CNI has said that the central bank’s decision to raise the bank rate by two points will cause additional problems. This will increase the interest rate of investment, increase in prices of consumer goods and further worsen the economic condition of the country.  

Facilitating Non-resident Nepali to open bank accounts in foreign currencies and carrying out a study to provide production industries with subsidized loans are among the welcoming moves of the central bank, according to the umbrella organizations of the private sector.  


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