KATHMANDU: The Nepal Rastra Bank (NRB) today unveiled the Monetary Policy for 2079/80. Unveiling the Monetary Policy, Governor Maha Prasad Adhikari informed that the Monetary Policy for the current fiscal year has been developed focusing on current economic scenario; rising inflation, depleting foreign reserve and persistence liquidity crisis.
“The Monetary Policy for this year primarily aims to address key concerns seen in the economy and support the government’s economic growth and inflation target,” said Adhikari.
The central bank, through the Monetary Policy, has raised the cash reserve ratio (CRR) limit from 3 percent to 4 percent. This means that now the banks will have to keep at least 4 percent of the deposit in balance.
Similarly, NRB has increased the bank rate to 8.5 percent from existing 7.5 percent. This will increase inter-bank transaction rate.
Governor Adhikari also informed that the central bank will reduce credit centralization. The NRB has set credit expansion target for this year to 12 percent and the growth of credit flow to the private sector at 12.6 percent. Last year, the growth rate of loan disbursement was 19 percent.
Similarly, Governor Adhikari also announced to implement ‘counter cyclical buffer’ which was postponed due to Covid-19. As per him, the counter cyclical buffer will be implemented by the end of 2080. NRB had introduced a provision through monetary policy of 2076 to apply counter-cyclical buffer by 2 percentage points.
The countercyclical capital buffer is designed to counter procyclicality in the financial system. When cyclical systemic risk is judged to be increasing, institutions should accumulate capital to create buffers that strengthen the resilience of the banking sector during periods of stress when losses materialise.
Similarly, NRB has announced that share trading of companies going to merger will not be stopped from now. “Suspension of securities transactions during mergers and acquisitions of banks and financial institutions have been cancelled,” informed Adhikari.