Monetary Policy 2077/78 of Nepal (Maudrik Niti 2077/2078) of Nepal has been published by NRB. The much-awaited monetary policy for the fiscal year 2077/ 78 has been unveiled today at 3 p.m.
The policy was publicly unveiled by NRB Governor Maha Prasad Adhikari via Nepal TV live.
The monetary policy is highly expected to revamp the collapsing economy because of the Covid-19 pandemic.
The policy was approved in the meeting of the board of directors of Nepal Rastra Bank this morning.
The monetary policy has now made it impossible to obtain a microfinance license. This is likely done because the microfinance sector in Nepal is already saturated.
Also, any microfinance license under the process of issuance has been abandoned.
The monetary policy has said that in view of the economic impact caused by the Covid-19 pandemic, liquidity will be eased and credit balance will be shifted.
The following provisions are being implemented to do so:
Projection of the 2077/ 78 fiscal year scenario
1) Annual Growth Rate target set at 7%.
2) Aim to limit consumer inflation no higher than 7%.
3) A permanent liquidity facility rate of 5% will be maintained as the upper limit of the interest rate corridor.
4) Deposit collection rate, which has been established as the lower limit of the corridor will be reduced from 2% to 1%.
5) The Repo Rate has been reduced from 3.5% to 3%.
6) Long-term Repo service will be made available to improve much-needed liquidity for financial rehabilitation.
7) The Mandatory cash ratio of 3 percent to be maintained by banks and financial institutions is kept intact.
8) The statutory liquidity ratio to be maintained by commercial banks of 10 percent, while that of development banks of 8 percent Percent and the finance company of 7 percent has been kept intact.
9) The lender of last resort rate has been kept intact at 5%.
10) Commercial banks will have to issue at least 15% of their loans in the agriculture sector by 2080 Ashadh end.
11) Agriculture Development Bank will be established as a “Lead Bank” in the agriculture sector. It can also issue Agriculture Bonds to ensure long-term availability of resources.
12) Inter-bank transactions of Agriculture Credit Swaps will be further simplified.
13) Commercial banks will have to issue at least 10% of their loans in the energy sector by 2081 Ashadh end.
14) Commercial Banks experienced in the energy sector will be allowed to issue Energy Bonds.
15) CCD Ratio has been increased from 80% to 85%.
16) BFI’s with a distributable profit lower than 5% of their paid-up capital, the distribution of cash dividend will be forbidden.
17) BFI’s with a distributable profit higher than 5% of their paid-up capital will be allowed to distribute 30% of dividends as cash dividend in maximum.
18) However, companies that satisfy the criteria in point 17 can’t distribute cash dividend that amounts to a larger sum than their Deposit Weighted Average maintained in Ashadh 2077.
Monetary Policy FULL TEXT