KATHMANDU: Nepal Rastra Bank (NRB) has been giving the message with the basis of speculating that the monetary policy will be somewhat narrowed.
Last week, in a discussion organized by the Nepal Management Association (NMA), Governor Maha Prasad Adhikari said that NRB had focused on resource management in the post-COVID period. He also urged the people to be ready for the monetary policy as per the demand of the economy.
Governor Adhikari said that the monetary policy will be prepared in such a way that the concessions will be reduced and urged to be ready for it. Compulsory cash reserves (CRR) have come down to 3 percent. There is definitely pressure on the central bank to formulate policy based on macroeconomic stability. However, the governor has been publicly urging the government to tighten monetary policy as much as possible. The governor’s main message is that the policy direction of monetary policy will return to the state of pre-covid.
NRB has now thoroughly analyzed the policies brought for relief and economic recovery in the special circumstances created by the Kovid epidemic. NRB officials have broken the continuity of such a policy and have brought a situation to bring monetary policy from a new vein. The governor has indicated that the CRR and statutory liquidity ratio will be increased from 4 percent to 3 percent in Kovid. Stating that the market is now demanding an increase in interest rates, they have also given indications that interest rates may increase further as a matter of policy.
According to experts, increasing the statutory liquidity ratio and mandatory cash reserves will further reduce the liquidity flow in the market. If the pressure on interest rates increases, raising bank rates will also affect interest rates.