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Interest rates of banks is determined by the market in liberal economy: NRB Governor

KATHMANDU: Nepal Rastra Bank’s Governor Maha Prasad Adhikari has raised a question to the people in general if they want to go back to the period before the country adopted liberal economy.

Speaking at the Second Economist Conference which kicked off in Kathmandu from Friday, Adhikari said, ‘Are you trying to go back to the year 2046?’

The NRB governor reminded everyone that the country has adopted an open market economy since 2046 BS in which the interest rate is set by the market.

He made such remarks in response to the calls from a section of the society urging the central bank to control the spiraling interest rates of banks and financial institutions.

Governor Adhikari clarified that the NRB has been doing its job to regulate the market and has taken austerity measures where necessary.

He said that using loan indiscriminately can lead to problems. He also said that banks cannot charge more than two percent of the base rate for small investors who invest less than Rs 20 million.

Governor Adhikari said, “We are making long-term investments. We have invested in land and built hotels. However, we have not been able to provide orientation on this subject and have not been able to provide literacy. We are now aggressively pursuing it. Since 2046 BS, Nepal Rastra Bank has deregulated interest rates. We don’t dictate the market. Now let’s have a debate on this matter too. Is this what the market wants? Is this what the private sector wants? Are we trying to go back to 2046 BS? Let’s discuss this too. We have made arrangements not to charge more than two percent of the base rate for those who invest less than Rs 20 million for small holders.”

Similarly, Governor Adhikari said that the economy is improving of late. He mentioned that the economy of Nepal is improving compared to other countries.

He clarified that the Balance of Payments were at a deficit of Rs 241 billion at the end of March last year, but by mid-December, there is BoP surplus of nearly Rs 100 billion.

He said that the data of the external sector of the economy has improved. Governor Adhikari said that Nepal currently has foreign exchange reserves of more than US$ 10 billion, which is capable of sustaining imports for about 10 months.

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