Monetary Policy for fiscal year 2075/76 unveils today; Major updates

The most eagerly waited Monetary Policy for the fiscal year 2075/76 is going to be unveiled today. The most important issue that people want to hear about is regarding NRB's plans to attain 8% economic growth rate whilst the inflation is to be maintained under 6.5%, which were 7.2% and 7% respectively in previous fiscal year.

Keep in touch for constant updates:

1. Persuant to the budget speech, inflation rate will be limited to 6.5%.
2. CRR for commercial banks, development banks and finance companies was 6%, 5% and 4% respectively which will not be maintained 4% for all. This will create Rs 48 arba worth extra liquidity in the banking system.
3. SLR for commercial banks has been decreased to 10% which was previously maintained at 12%.
4. Hedge fund for foreign loans to be brought by commercial banks will be facilitated by NRB.
5. Personal Overdraft loan has been decreased from existing Rs 75 lakh to Rs 50 lakh.
6. Commercial Banks can bring in foreign loan worth 25% of its core capital. Extending the same provision, banks can further bring in loan worth 25% of its core capital in Indian currency.
7. Microfinance companies are also allowed to bring in foreign loan worth 25% of its core capital.
8. Lending to priority sectors will be maintained at 25%, 15% and 10% for commercial banks, development banks and finance companies respectively.
9. Institutional deposits maintained at 45% of total deposits.
10. Banks' interest spread is limited to 4.5% from previous 5%.
11. BFIs are allowed to collect maximum 15% of total deposit from single institution which was previously 20%.
12. Each commercial bank to open regional head office in all provinces.
13. Commercial banks now will not need prior approval from NRB to open new branches outside metropolitan or submetropolitan cities.
14. Merger and acquisition to be encouraged.
15. Provision to develop real estate price index.
16. Measures will be taken to eradicate unhealthy practices among BFIs.
17. Commercial banks' subsidiary companies can request approval from NRB to receive broker license.
18. Borrowers borrowing above Rs 50 crore need to get credit rating and above Rs 25 crore need to get DDA done from third party before applying.
19. BFIs cannot make margin calls unless the price of shares fall below its 180 days average.
20. Income tax clearance certificate made mandatory to apply for loans in BFIs.
21. Development banks and Finance companies should also publish their financial statements as per NFRS standards.
22. Microfinance need to abide by Credit Information Bureau (CIB).
23. Microfinance spread is to be maintained at 6%.
24. No change in the paid-up capital requirement for microfinance.
25. Margin Lending has been now capped to 25% of BFIs' core capital which was 40% last year.
26. Lender of Last Resort (LOLR) rate has been decreased to 10% from previous 12%.
27. Foreign investment in infrastructural development projects will be collected in a separate fund in NRB for which NRB itself will provide hedging facility. Such projects include Hydropower projects, Electricity transmission lines, road and transportation development projects and so on. Necessary modaility is being prepared for it and NRB expects that this will encourage foreign investors.
28. Nepal Government to provide 5% interest subsidy on loans against academic certificate and 6% interest subsidy for loans provided for Women entrepreneurship Development.
29. BFIs allowed to go only 1% higher than the published interest rate on fixed deposits.
30. BFIs allowed to include long-term credit instruments and bonds in CCD ratio calculation.
31. Necessary coordination will be done to increase the existing deposit insurance of Rs 2 lakh to Rs 3 lakh.
32. Import above USD 40 thousand from third country and above IC 5 crore from India will be required transacted through Letter of Credit.