Kathmandu. The Federation of Nepalese Chambers of Commerce and Industry (FNCCI) has expressed hope that the monetary policy unveiled by the Nepal Rastra Bank (NRB) for the fiscal year 2082/83 BS will boost the economy.

Governor of The Rastra Bank. According to the Federation, further reforms are needed to increase targeted investment and manage the risk in the financial sector through the policy presented by Bishwanath Poudel.

In the monetary policy, the stable exchange rate of the Nepali rupee with the Indian rupee has been considered as a restriction of the monetary policy, but it has been kept as an interim target. The Federation is of the view that it is necessary to keep the stable exchange rate as a safeguard in Nepal’s international trade intact.

The bank rate, which is the upper limit of the interest rate corridor, has been reduced from 6.5 percent to 6 percent and the deposit collection rate as the lower limit of the interest rate corridor has been reduced from 3 percent to 2.75 percent. The policy rate has been reduced from 5 percent to 4.5 percent. Although this arrangement may reduce the interest and increase the flow of credit to some extent, it seems that the general saver may be discouraged as the interest on savings will also decrease.

According to the monetary policy, the loan limit for the construction and purchase of private residential houses will be increased from Rs 20 million to Rs 30 million and the loan price ratio can be kept up to a maximum of 80 percent for the flow of such loans and a maximum of 70 percent in the case of others. The Federation had also given its suggestions in this regard. It can also be expected to have a positive impact on the economy as it can attract the general public to buy houses.

Similarly, the guidance on current capital loans will be revised as per the need based on the nature of business of agriculture, small and domestic industries, education, health, sports, communication and media houses, and the loan repayment-income cycle. This is a welcome arrangement. However, since the nature of the loan is different, it is necessary to relax this arrangement in all sectors, so it would be appropriate to implement the suggestions given by the Federation so that the banks and borrowers themselves can take decisions in this regard.

There is a provision to review the existing loan classification and loan loss arrangement as per the need. The guidelines in this regard will become more clear after the income. In order to facilitate credit to agriculture, micro, domestic, small and medium businesses, banks and financial institutions have made arrangements to provide agricultural or commercial loans up to Rs 1 million after evaluating the mortgage themselves. Provision of minimum loan loss during the grace period of loan up to Rs 1 million to be disbursed in this way, provision of banks to provide loans of different periods and nature in line with the nature of production for agri-business related works will be further simplified.

Similarly, the provision of facilitating loans for the purpose of increasing the production of agricultural produce of varieties recommended by the Nepal Agricultural Research Council (NARC) is welcome. According to the monetary policy, hotels and restaurants with food hygiene stratification logo (sign) from the Department of Food Technology and Quality Control in the areas around the postal highway and mid-hill highway and the industries and businesses around the main market of the highway÷lokmarg will be promoted.

Loans disbursed up to Rs 30 million in such sectors will be included in the loans disbursed to small and medium enterprises and will be counted in the loans disbursed in the specified sectors. The Federation also welcomes the provision of extending loans by adding a maximum premium of up to 2 percentage points to the base rate on such loans.

In the monetary policy, necessary facilitation will be made for restructuring and rescheduling the loans disbursed to firms and companies related to land development and building construction registered with the bodies approved by the Government of Nepal. There needs to be a clear provision in the guidelines for its implementation.

Similarly, the provision of rescheduling and restructuring by recovering at least 10 percent of the interest amount of commercial loans disbursed to projects in earthquake-affected areas including Jajarkot and Rukum is welcome, but it is necessary to provide this facility to all the borrowers who are in trouble when the economy is not yet moving. Since the provision in this regard has been made in the budget statement, it is necessary to make arrangements accordingly.

It is expected that the provision of increasing the single customer loan limit from Rs 150 million to Rs 250 million for margin type loans disbursed by banks and financial institutions on share collateral is expected to have a positive impact on the stock market.

The provision of policy facilitation in the existing system of blacklisting due to cheque dishonour will help in organizing the market, but a law related to borrowing is necessary to solve the problems seen in the market. The federation has been raising this issue.

Similarly, the Federation had suggested making necessary arrangements to facilitate the construction of infrastructure. According to the monetary policy, banks and financial institutions can invest in debentures issued by the agencies established with the objective of investing in the infrastructure sector set by the Government of Nepal to raise financial resources. The federation has taken this positively.

Provision has been made to facilitate the effective implementation of concessional loans mentioned in the budget statement of the government for the fiscal year 2082/83 BS. There is a need for a policy arrangement in this regard.

Similarly, the FNCCI is of the view that the internal remittance service should be opened to keep the market moving, even though the provision of bringing remittance income from the formal financial system mentioned in the budget statement of the current fiscal year and encouraging investment in productive sectors and linking all payments from public bodies to the electronic system is welcome.

It is also positive that a draft act and rules required for the establishment of asset management companies will be prepared and submitted to the Government of Nepal with the aim of helping in the management of non-performing loans and non-banking assets in the banking sector.

The ‘Nepal Rastra Bank Foreign Investment and Foreign Debt Management Bye-laws, 2078 BS’ will be amended to facilitate the promotion of foreign investment. There is a provision to facilitate the foreign investors making foreign investment in Nepal to take back payments including principal, interest and dividend. This will help attract foreign investment. The FEDERATION is of the view that these and similar facilitation arrangements should be implemented immediately as only 0.2 per cent of the GROSS domestic product (GDP) is receiving foreign investment.

The Federation has also taken a positive view of the provision of providing exchange facility up to US$ 2500 per time to Nepali citizens visiting countries other than India, which has been increased to US $ 3,000.

According to the policy, a study will be conducted on the system of classifying remittance companies on the basis of capital and turnover. Similarly, the provision of revising the digital lending guidelines to facilitate loans to micro, small and medium enterprises based on transactions through electronic means is also positive.

According to the monetary policy, customer identification details will be facilitated to be obtained through national identity cards. The Federation has been making suggestions in this regard for a long time. After the customer updates the details in one of the banks, the necessary body will also facilitate the development of infrastructure that can be obtained through electronic means.

The Federation hopes that the “Nepal Rastra Bank with Borrowers” program will be launched with the objective of being in constant dialogue with the borrowers in the rural areas. For the fiscal year 2082/83, the growth rate of the comprehensive currency provider is estimated to be 13.0 percent and the growth rate of credit to the private sector is estimated to be 12.0 percent. In the context of less than 8 percent credit flow at present, the Federation believes that the guidelines and circulars issued for the implementation of monetary policy can address the issues demanded by the private sector.