How Can We Solve the Current Liquidity Crisis? This is What High-Level Meeting Suggests

Finance Minister Janardan Sharma has urged the banks to accept the lands in remote areas which are not covered by roads as collateral.

He made the request during a discussion with the Governor of NRB, CEOs, and representatives of commercial banks at the Ministry on Friday.

Minister Sharma said that the poor farmers are not getting bank loans as the banks have taken only the land that has reached the motor road as collateral. "Banks need 10 feet highway to lend," he said.

"You don't even want to pledge agriculturally fertile land. In agricultural loans, banks should be able to accept collateral based on agriculture features," Sharma said.

Minister Sharma pointed out that the banks have been meeting the credit limit recently and urged them to study the state of credit flow now. He said that the bank itself should monitor how much the borrower has invested in which sector and the statistics should be updated.

He said that the flow of credit would also be easier if banks updated the debtor data. Similarly, Sharma was of the opinion that NRB should stress the need to move ahead by modifying the policy in a timely manner, saying that the entire purpose of banks would not be meaningful if they could not disburse loans.

Stating that there is no serious and specific reason for the lack of liquidity in the market recently, Minister Sharma said that there is no need to panic now. Minister Sharma said that liquidity balance can be achieved by increasing government capital expenditure in the short run and managing foreign resources.

He said that the liquidity problem could be solved in the long run only by mobilizing capital in the manufacturing sector. "As soon as capital is mobilized in the manufacturing sector, many problems will be solved," he said, urging banks to "tighten lending to unproductive sectors".

"We have tightened some imports now. Banks should also increase restriction in the same way," Sharma said.

During the discussion, Finance Secretary Madhu Kumar Marasini clarified that liquidity will not be reduced by transferring local level funds to commercial banks as the banks have said. "Money doesn't go all at once. There's not as much money as you say," Marasini said.

Similarly, Chairman of Nepal Bankers Association and CEO of ADBL Anil Kumar Upadhyaya suggested that the lack of liquidity in the market could be solved by increasing the capital expenditure of the government. He also said that the liquidity problem would be solved immediately if arrangements were made including Hundi control, a speedy introduction of foreign loans or grants, and keeping 100% of the funds of local level and corporations in commercial banks.

Similarly, Nabil Bank CEO Anil Shah stressed the need to increase foreign exchange reserves by stopping the import of non-essential items. He suggested that the import of chocolate and other commodities should be stopped.

Governor of NRB Maha Prasad Adhikari, CEOs and representatives of commercial banks were present at the discussion held at the Ministry.