The Nepal Rastra Bank (NRB) Tuesday announced a new monetary policy for the fiscal year 2002-2003. The new policy will cut down Cash Reserve Ratio (CRR) by one percentage point starting today in order to inject more liquidity in the money market.
The reduction would enable the commercial banks to provide soft loans as the cost of funds will go down, NRB Governor Dr. Tilak Rawal said.
After the implementation of the new monetary policy, the role of the central bank is expected to be more effective in maintaining monetary discipline in both the banking and non-banking sectors.
“The policy will help reinvigorate economic growth to a desired extent,” Dr. Rawal said.
He said that the NRB was looking forward to establish the Asset Management Committees to solve the problems of non-performing loans. The companies are expected to encourage financial restructuring programmes.
As per the NRB Act-2058, directives concerning the Credit Information center will be issued under the new policy. Besides, the Financial Institutions Act and Anti-Money Laundering Act, which are in the offing, will help maintain fiscal discipline, the governor said.
The amount of overdraft taken by the government would be reconciled by issuing Treasury bills, which must be settled within 180 days. This provision will help maintain monetary discipline, Dr. Rawal said.
The NRB will accept applications for the establishment of new commercial banks from July 17, the new Monetary Policy states.
Under the new policy, the general public will be allowed to open saving accounts in the development banks. For the management of long-term capital, the NRB will deposit five per cent of its net profit in a fund.
The shares of rural banks will be gradually transferred to the private sector while government bonds with NRB ownership will be gradually sold to the banking and non banking sectors.
The five per cent spread rate required of commercial banks has now been scrapped under the new system. The new system has also scrapped foreign currency facilities given to import goods from India.
The maturity period of the Letter of Credit (LC) has been extended from six months to one year on the basis of deferred payment for import of machinery and raw materials.
The NRB will charge banking institutions 0.15 rupee per US dollar, which is deposited through foreign employment.
To assist the sick industries, the NRB has made a provision of Rs 1.11 billion at the three per cent interest. nepalnews.com am July 17