Banks halt luxury items’ imports amid dwindling forex reserves

KATHMANDU: The Nepal Bankers’ Association, an organization of chief executive officers (CEOs) of commercial banks, has decided to halt the issuance of letter of credit (LC) used for import of luxury items for a week.

Imports are set to decrease as banks do issue LCs.

A meeting of the association held on Sunday decided to keep the interest rate of deposits stable in the last quarter of the running fiscal (in Baisakh) and halt opening of LC for non-essential items for one week.

The outflow of foreign currency has increased due to increasing imports, and the Central Bank, Nepal Rastra Bank (NRB), had earlier asked asked not to issue LCs for luxury items, fearing declining foreign exchange reserves could lead to worsening economic situation.

“The Central Bank has urged not to open LCs for luxury items; however, it has not mentioned for how long,” said a member of Bankers’ Association. “Therefore, we decided to halt LC’s for non-essential items for at least a week.”