Kathmandu. KATHMANDU: The Federation of Nepalese Chambers of Commerce and Industry (FNCCI) has said that the monetary policy for the fiscal year 2083÷84 released by Nepal Rastra Bank (NRB) on Tuesday is positive and balanced, which will boost the morale of the private sector.

According to the FNCCI, the monetary policy has attempted to maintain balance between price stability, stability of financial sector and high economic growth at a time when the country’s economy was gradually moving towards the path of recovery. The FNCCI has welcomed the monetary policy to internalize the reality that the role of private sector would be crucial in achieving the government’s target of 7 per cent economic growth.

FNCCI President Anjan Shrestha said that a flexible political line adopted by the monetary policy was appropriate to expand private sector’s investment, increase production, create employment and make economic activities more dynamic.

“Efforts have been made to address various issues that have been raised by the FNCCI for a long time in the monetary policy,” Shrestha said, adding, “The provisions to remove the situation of unlimited liability created on the basis of personal guarantee, management of the non-performing loan in sick industries and measures to revive the loans under pressure are positive.” Likewise, determination of limit of share mortgage loan on the basis of institutional capacity and easing of loan-collateral ratio for large electric vehicles used in public transport are positive. ”

However, the Federation of Nepalese Chambers of Commerce and Industry (FNCCI) has stressed on the need to clearly include in the upcoming guidelines regarding restructuring and rescheduling of small and medium and large enterprises and various sector loans. According to the FNCCI, the decision to keep the policy rate, fixed deposit facility rate, bank rate, cash reserve ratio, statutory liquidity ratio and permanent liquidity facility will maintain policy stability. This is expected to boost investor confidence and make the business environment more predictable.

Likewise, the FNCCI has welcomed the policy of digitalization of banks and financial institutions, reduction of financing cost, improvement in quality of service and making regulatory system simpler, clear and effective. The FNCCI has expressed the expectation that the decision to simplify the directives of banks and financial institutions and ease the foreign exchange system would help ease trade, investment and foreign transaction.

The FNCCI believes that the NRB’s projection of a strong external sector will be strengthened with the increase in sufficient foreign exchange reserve, remittance inflow, tourism income and service export. “However, the success of the monetary policy depends on its effective implementation,” Shrestha added. “To achieve the target of 11 per cent credit flow and to utilize the adequate liquidity available in the banking system, credit should be disbursed in an easy and concessional manner to industry, agriculture, tourism, energy, information technology, infrastructure, export-oriented industries and small and medium enterprises,” he said. Economic revival will not pick up pace unless credit is extended to the real productive sector. ”

The FNCCI has also stressed on the need of moving ahead the economic reform programme launched by the government along with the monetary policy, investment-friendly legal reforms, effective implementation of capital expenditure and speed of projects in a parallel manner. The FNCCI believes that the expected economic transformation would be possible only when there is effective coordination between the monetary and fiscal policies.

The FNCCI has also expressed its commitment to continue collaborating with the NRB and the government for competitive capacity enhancement of private sector, expansion of investment and sustainable economic development. The FNCCI is of the view that the economy will gain further momentum through public-private dialogue and policy stability.

Meanwhile, the FNCCI is of the view that the demand of the private sector to make the loan classification and loan loss system flexible should be seriously considered, the provision related to watch list and backlist should be made flexible and easy for two years in the current situation and financial sector reform 2.0 should be forwarded.

The private sector has stressed the need to implement the second-generation financial reform programme that incorporates recapitalization of the banking sector, management of passive assets, expansion of risk sharing mechanisms and development of financial instruments targeted at productive sectors.