Amendment in First Quarter Monetary Policy; How Will it Affect Banks and Financial Institutions?
Section 79 of the Nepal Rastra Bank (NRB) Act, 2058 has amended/added the first monetary policy, Integrated Instruction, 2078 issued to banks and financial institutions of "A", "B", "C" and “D” categories licensed by NRB.
The regulations state that starting in the month of Chaitra 2079, the average interest rate differential between "A" class commercial banks and "B" and "C" class institutions cannot exceed 4.2 percent and 4.8 percent, respectively. Starting in the month of Asar 2080, the gap should not be greater than 4.0 percent for commercial banks in the "A" category and 4.6 percent for institutions in the "B" and "C" categories.
Previously, the National Bank has already announced a reduction in the spread rate taken by the banks, indicating that the interest rate will be reduced. NRB has announced that the spread of commercial banks decline from 4.4 percent to 4 percent. However, after the spread rate is applied, it takes about a year to see its effect on the interest.
The current bank rate (Rates at which banks pay interest to NRB) is 8.5 percent and the interest paid to the general public is not less than that. Due to this, the interest rate of ordinary terms has reached 12.133 percent. The highest interest of ordinary savings has reached 9.133 percent. This interest increased after the SLF (Standing Liquidity Facility) of 7 percent to 8.5 percent.
In addition to maintaining the bank rate at 8.5 percent, the policy rate is at 7 percent, the deposit collecting rate at 5.5 percent, and the required cash ratio has been raised to 4%.
On the other hand, while calculating the loans to be provided in the designated areas, it is said to start the calculation from the Poush 2080 and calculate it every quarter after that on the basis of the total outstanding loans and loans of the previous 6 months. The loan disbursement time in the specified area has also been increased till Ashad 2083. This means that now the banks and financial institutions have to calculate the loans to be provided in the designated areas every quarter.
Similar to this, Rastra Bank has made arrangements so that investments made in bonds issued by public limited companies involved in the agricultural sector by banks and other financial institutions can be counted within the predetermined limitations.
From Magh, microfinance institutions must also post the base rate on a monthly basis on their website. This clause was added by Nepal Rastra Bank to the integrated directive, 2078, which was distributed to regulated microfinance financial institutions in the "D" category. The base rate was not previously required to be published on microfinance financial institutions' websites on a monthly basis.
