New monetary policy comes with some good news for the market (EXCLUSIVE)
ShareSansar, July 18:
Nepal Rastra Bank announced the monetary policy for the new fiscal year 2071/72 on Friday afternoon.
The new monetary policy has come up with many announcements which will send positive signal to the stock market.
As per the fifth monetary policy announced by Governor Yuvaraj Khatiwada at the jam-packed NRB hall, Baluwatar, the central bank has come up with a number of short- as well as long-term measures to mop up surplus liquidity in the capital market.
The central bank has increased the Cash Reserve Ratio (CRR) rate for class 'A' by one percent, for class 'B' 0.5 percent and for class 'C' same as it was before through the monetary policy announced today.
The bright side of increased CRR is that it will entail better financial health for the BFIs in a longer run, and thereby better returns, according to chairperson of Nepal Investors Forum Raj Kumar Timilsina.
It has also given continuity to its policy to promote merger/ acquisition of the BFIs.
The monetary policy has also stated that the central bank is committed to enforce BASEL III gradually, though it has decided to keep the paid-up capital requirement for the BFIs “as it is” for now.
Expect more bonus, right shares from commercial banks
Another announcement of the new monetary policy, which may have impact on the stock market is that the commercial banks, which have failed to shore up their paid-up capital to Rs 2 arba will not be allowed to issue cash dividend and expand their branches.
This means that a number of commercial banks will now have to issue either right or bonus shares, which is not at all bad for the stock investors or the market.
These BFIs will now face restriction on deposit and loan mobilization, too. This measure clearly indicates that the central bank is very serious when it comes to paid-up capital requirement.
The monetary policy has also clearly stated the central bank will hand over the management of Nepal Bank Limited by maintaining the standard capital adequate ratio within this fiscal year.
Marginal lending at fixed interest rate
Reading out the monetary policy, Governor Khatiwada also informed that the central bank will tighten marginal lending to the extent that the BFIs will now have to issue share loans on a fixed percentage based on the market value of the scrip.
“We will come up with the details within a few days,” the governor added.
This has come as a relief to the share investors who were somewhat anxious following a number of media reports that the central bank may strongly discourage or restrict marginal lending.
Provision on promoters’ category, tenure, significant shareholding
Another policy that may have direct bearing on share holders is that the monetary policy has removed the categories for the promoters of the BFIs. It means that now there will be only one category of the promoters in the BFIs.
Another important aspect of the new monetary policy is that to ensure good corporate governance, the incumbent chairperson, managing directors and board of directors as well as chief executive officers cannot hold these posts for more than two tenures in a row.
“The current tenure of the incumbent officer will be counted as the first tenure while enforcing this provision,” Governor Khatiwada further clarified on the provision, adding that this provision is aimed at addressing possible irregularities in the BFIs when the same persons retain the top posts for a long time.
Another major decision of the monetary policy is that a person who holds more than 1 percent stake in a BFI cannot become an executive of that BFI.
To further promote corporate good governance, now the promoters or chief executive officer cannot also take loan for from the BFI to another firm where they may hold major stake.
Great news for MFIs
The monetary policy has stated the central bank will come up with a provision for the microfinance institutions operating in districts in financial hubs will have to raise their paid-up capital within this fiscal year.
Now the class ‘D’ MFIs can issue loan on zero interest rate up to Rs 30 lakh from the existing provision of Rs 20 lakh if they open new branch in the district less accessible from financial point of view. MFIs do not even have to seek prior permission from the central bank to open such branches.
To further promote the MFIs, the monetary policy has now allowed the MFIs to issue up to Rs 2 lakh to good credit from the deprived class from the existing 1.5 lakh, and to increase the microcredit loan from Rs 4 lakh to Rs 5 lakh.
On the other hand, the percentage of the loan given to the MFIs by the BFIs has not been changed.
