NRB tightens FIs interest earnings
KATHMANDU:
The central bank has set the deadline for banks and financial institutions to close their interest yielding deposit accounts in other banks and financial institutions to prevent asset mismanagement.
Nepal Rastra Bank (NRB) has — issuing a directive today — asked the banks and financial institutions to close such accounts held in other banks and financial institutions by the end of the second quarter of the current fiscal year to avert assets-liability mismatch situation.
“The banks and financial institutions had developed a penchant of depositing their money for longer period in other financial institutions and borrow for short-term which has created asset-liability mismatch fuelling liquidity crisis,” said Bhaskar Mani Gyanwali, spokesperson for NRB. “The central bank’s provision aims at avoiding such occurrences in the future,” he added.
However, president of Nepal Financial Institutions Association Rajendra Man Shakya is wary that ban on interest yielding deposit will dry up an income source of finance companies.
“Finance companies deposit their access liquidity at commercial banks for the interest that compensate a little for higher interest rate offered to attract deposits,” he pointed out.
“But the central bank move will tightens the financial institutions interest earnings.”
Similarly, the central bank today also relaxed the loan loss provisioning for the banks and financial institutions on hydropower and infrastructure projects. “The banks and financial institutions can reschedule or restructure the loans issued to hydro projects, cable car and other infrastructure projects and provision only one per cent considering them as good loans.”
Earlier, the restructuring of the hydro project loans were undertaken with 12.5 per cent provisioning.
“The amended provision will encourage banks to float loans to the hydro projects and other infrastructure projects that are recognised as highly prioritised by the government,” pointed out Gyanwali.
NGOs reporting
Nepal Rastra Bank (NRB) has asked financial Non Government Organisation (NGOs) that provide limited banking services to submit monthly financial report from this month. The NGOs licensed by the central bank to undertake financial intermediaries’ role will need to report to the central bank on the monthly basis within the fortnight of the next month. There are 38 such NGOs in operation.
Source: THT
The central bank has set the deadline for banks and financial institutions to close their interest yielding deposit accounts in other banks and financial institutions to prevent asset mismanagement.
Nepal Rastra Bank (NRB) has — issuing a directive today — asked the banks and financial institutions to close such accounts held in other banks and financial institutions by the end of the second quarter of the current fiscal year to avert assets-liability mismatch situation.
“The banks and financial institutions had developed a penchant of depositing their money for longer period in other financial institutions and borrow for short-term which has created asset-liability mismatch fuelling liquidity crisis,” said Bhaskar Mani Gyanwali, spokesperson for NRB. “The central bank’s provision aims at avoiding such occurrences in the future,” he added.
However, president of Nepal Financial Institutions Association Rajendra Man Shakya is wary that ban on interest yielding deposit will dry up an income source of finance companies.
“Finance companies deposit their access liquidity at commercial banks for the interest that compensate a little for higher interest rate offered to attract deposits,” he pointed out.
“But the central bank move will tightens the financial institutions interest earnings.”
Similarly, the central bank today also relaxed the loan loss provisioning for the banks and financial institutions on hydropower and infrastructure projects. “The banks and financial institutions can reschedule or restructure the loans issued to hydro projects, cable car and other infrastructure projects and provision only one per cent considering them as good loans.”
Earlier, the restructuring of the hydro project loans were undertaken with 12.5 per cent provisioning.
“The amended provision will encourage banks to float loans to the hydro projects and other infrastructure projects that are recognised as highly prioritised by the government,” pointed out Gyanwali.
NGOs reporting
Nepal Rastra Bank (NRB) has asked financial Non Government Organisation (NGOs) that provide limited banking services to submit monthly financial report from this month. The NGOs licensed by the central bank to undertake financial intermediaries’ role will need to report to the central bank on the monthly basis within the fortnight of the next month. There are 38 such NGOs in operation.
Source: THT
