Excerpts of the interaction program focused on implementation of the Monetary Policy by NRB today

Wed, Feb 5, 2020 4:46 PM on Economy,

Nepal Rastra Bank (NRB) had organized an interaction session today among major stakeholders of the financial market with an aim to collect suggestions regarding the ongoing Monetary policy implementation. The program was hosted by Governor of Nepal.

The first suggestion was provided by the Chairman of Nepal Bankers' Association, Bhuvan K. Dahal. He highlighted that the current interest spread is very tight for the banks as they had also suspended other charges that banks used to take on loans when he first had entered the banking industry.

Similarly he added that the banking system has consolidated a lot in comparison to past and the competition is also getting tight. Therefore NRB should let the banks go into M&A on their own due to pressure from competition rather than forcing because banks have their own expertise and fields they have chosen which may not be compatible with the other.

He also requested that NRB reconsider the capital buffer given that all indicators are showing that the economy is slowing down. So in a slowing economy, buffer adds more burden to the banks.

Then Mr. Kishor Upadhyay from FNCCI presented his suggestions on behalf of business community. He said that banks should now have an integrated system where KYC once filled in one banks gets automatically updated everywhere thereby reducing hassles. He highlighted that the system of taking collateral and person guarantee is very old. Once you take collateral it's a collateral-based loan not project based loan. So the banks need to modernize themselves on this front.

Similarly he asked to clarify the working mechanism of interest subsidy for women entrepreneurship as this hasn't been seen practically being implemented.

Likewise the Vice Chairman of Nepal Chamber of Commerce, Rajendra Malla, focused on Agriculture, small and medium enterprises, cottage industries and fund mobilization in these sectors. He pointed out that lending in SMEs has decreased after making tax clearance certificates compulsory.

Confederation of Nepalese Industries representative Anal Raj Bhattarai said, "Almost all industries of Nepal are facing problem in forward integration and therefore that must be facilitated. This will help us improve our situation where our exports depend on imports."

The representative of Development Bankers Association said, "The cost of borrowing has increased we must think of ways to improve that." He added, "Government accounts should also be provided to Development banks. Letter of credit (LC) in local levels had come but hasn't been practically implemented. Therefore, that also be looked. Likewise,
we can issue Debit card but not credit card while we are allowed to float non-collateralized loans of bigger amount. So credit cards with 50 to 60 thousand limit must be allowed."

Representing the Automobile Sector, Saurav Jyoti said, "Nepal's internet penetration, mobile phone penetration and online social media penetration is increasing. Recently advertisement in online media was said to be informal so we request NRB to create a formal channel to do so." To this NRB said that they are in process of creating a formal channel and conclusive results will be obtained within 15 days.

Mr. Jyoti added, "The fixed interest rate on loans has been implemented but that is only for 2 years for now, but the projects such as Hydropower are longer than that. So this must also be lengthened based on project type."

Adding to his colleague, Mr. Kamalesh Kumar Agrawal of NCC said, "At the beginning of the fisc year, 8.5% GDP growth was aimed but the directives that followed and the Monetary Policy was very contradictory in nature. Because of this IMF also projected our growth at around 6% only. So, the growth target must be facilitated by expansionary policies. Likewise, Domestic investment hasn't been encouraged due to AML compliance requirements. This has to be looked into. Similarly, Foreign Investment amount has been benchmarked based on number of person, but that must be on the basis of project for which the investment is coming. Also, the Monetary policy had mentioned hedging but still no efforts are being made. NRB must highlight ways and procedures for hedging."

Saroj Kaji Tuladhar from Nepal Finance Companies' Association stated, "Our staffs' money goes to CIT and EPF, but they give deposits to commercial banks only. That must be answered."

The representative of Nepal National Cooperative Association said, "This sector has been contributing to financial literacy of the country and that must be recognized. The issue of STI for regulation is still in the limbo and we need help from NRB to regulate the cooperatives."

Mr. Paras from Nepal Farmers Association said, "Agriculture import has increased by almost 3 times in past few years and I see that is because banks are focusing more on trading. Even I have been personally advised by bankers to enter trading rather than manufacturing, and that has a huge impact in agriculture production. I'm an entrepreneur. If I don't have land or property passed on by ancestor then am I not eligible to start my own business? So the loans providing by taking certificate as collateral must also be implemented and check bounce must be treated as a crime."