Monetary Policy 2012-13 : NRB plans to hike limit of interest-free loans to MFIs

KATHMANDU, JUL 23 -

The Nepal Rastra Bank ( NRB ) is all set increase the limit of interest-free loans that it gives to micro-finance institutions ( MFI s) operating in nine specified districts, in the upcoming monetary policy. The current limit for such loans is Rs 1.5 million.

“The new monetary policy will increase the size of interest-free loans to up to Rs 2 million,” said NRB sources, adding that the new policy will also enable finance companies to get such loans. “Now, finance companies, along with MFI s, will get interest-free loans from the central bank,” said the sources.

With the country’s foreign exchange reserve in a comfortable position, the central bank is also planning to relax foreign exchange facility for Nepalis travelling abroad, the sources said.

NRB will also not charge penalty interest on refinancing to banks and financial institutions (BFIs). Although the bank rate is at 7 percent, NRB had charged a penal rate of 3 percent while providing refinancing to liquidity crunch-hit financial institutions last year.

The central bank will also adopt fixed interest rate regime on repo and reverse repo. Currently, the market determines the rate.

According to the sources, inflation target will be fixed at 7.5 percent. The target for the last fiscal year was 7 percent.

Source: The Kathmandu Post