Private sector cautiously welcome NRB’s Q3 review report

KATHMANDU, MAY 14: The third quarterly review of the monetary policy for 2022–2023 was released by Nepal Rastra Bank (NRB) on Friday. The private sector has cautiously welcomed the announcement.

The Federation of Nepalese Chambers of Commerce and Industry (FNCCI), the Confederation of Nepalese Industries (CNI), the Federation of Nepali Cottage and Small Industries (FNCSI), and the Confederation of Banks and Financial Institutions Nepal (CBFIN) – umbrella organizations of the private sector – have claimed that the monetary policy review does not fully incorporate measures to address the country’s ongoing economic problems. However, they have commended the country’s central bank’s modest policy review measures.

Despite expectations from the government and the private sector, the country’s central bank has changed only a few policy measures and largely kept the monetary policy for this year unchanged.

This is surprising, given that this time, the monetary policy was anticipated to implement radical measures to address the economy’s issue at a time when the nation is wracked by recession. Instead of focusing on making use of the available fiscal space, the government had been pressuring the NRB to announce significant revisions to its policies during the third-quarter review.

CBFIN President Pawan Golyan has stated that the third review is somewhat favorable. However, Golyan has added that it is not enough to address the serious economic issues facing the nation.

The threshold for credit restructuring and rescheduling for small businesses has been raised from Rs 20 million to Rs 50 million, and the NRB’s new rule that includes debentures in the credit-deposit ratio is a positive step, according to Golyan.

The FNCCI has expressed concerns that the revised monetary policy may not greatly help the market’s resource mobilization, which is suffering from a severe slowdown. While the monetary policy has recognized the major economic problems like increasing credit risks, high inflation, and excessive interest rates, the policy measures introduced are not adequate, according to a press release from the FNCCI.

The FNCCI is worried that the slightly lower policy rate might not be able to lower the high interest rates on bank loans. The NRB has reduced the bank rate from 8% to 7% through the revised monetary policy.

According to the FNCSI, the revised monetary policy is a good way to deal with the issues that small businesses are currently having. However, the central bank must focus on effective implementation to achieve the results, according to a press release from FNCSI.

Although the NRB has kept the provision in its main policy document, the umbrella organization for small businesses has blamed banks and financial institutions for not giving them subsidized loans. As of mid-April, only 147,807 small businesses had accessed credit through this facility, according to the FNCSI.

The CNI has also hailed the NRB’s decision to switch to softer provisions from a tighter monetary policy as positive. Although the revised policy was unable to address the major problems facing large and medium-sized businesses, it may enable small businesses to largely avoid being affected by the new regulations.

NRB Governor Maha Prasad Adhikari has stated that the government has taken responsible action to stop the economy from getting worse. “We have thought about flexibility in monetary policy this time to address the stagnation seen in the economy,” he said.