Nepal Rastra Bank has officially released the monetary policy for fiscal year 2083/84, introducing important directions for stock market loans, banking sector reforms, and credit expansion.
Introduction to New Monetary Policy
Nepal Rastra Bank has made public the monetary policy for fiscal year 2083/84. This time, central bank has focused on credit expansion, improving banking sector, and keeping policy stable. The policy gives important updates on share pledge loans, non-performing loan management, and banking system reforms.
New Presentation Style of Central Bank
This year, Nepal Rastra Bank did something different. The main monetary policy document is kept very short, written in only four pages. The detailed economic analysis and report have been published separately in Macroeconomic Report and Monetary Policy Implementation Review.
Credit Target to Support Economic Growth
To help government achieve the target of 7 percent economic growth, central bank aims to expand private sector credit by around 11 percent. Currently, private sector credit is around 60 kharba rupees, which means the bank plans to flow more than 6 kharba rupees of new credit in the coming year.
However, the central bank accepted that credit demand in domestic market is still weak. Also, some bank and financial institutions are facing pressure in their capital adequacy. To help this, Rastra Bank hinted that they might adjust regulatory rules to make credit expansion more easier.
Inflation Control and Non-Performing Loans
The central bank expects that average inflation will remain under 5.5 percent. Because inflation is under control, the bank feels there is no need for big changes in monetary tools for now.
An important part of this monetary policy is management of non-performing loans (NPL). The central bank will not treat genuine borrowers who suffer from business slowdown and willful defaulters in same way. People facing real business problems will get support, while those who willfully do not pay back loans will face strict supervision.
Policy Stability and Specialized Banking
Nepal Rastra Bank has given a clear message that it will not change rules frequently. New rules will only come when there is a risk in whole system. This will make it easy for banks to plan for long term. Rastra Bank also wants to make banking more specialized. Commercial banks, development banks, and finance companies will be encouraged to focus on their own special areas instead of doing same kind of business.
Changes in Share Pledge Loans and Bank Investment
The most discussed topic in this policy is share pledge loans. Nepal Rastra Bank is planning to set loan limits based on financial health and quality of companies. Right now, same rule applies to all companies. In future, strong companies might get higher loan limits, while weaker companies will get lower limits.
But the policy did not give extra facility for banks in stock trading as the market wanted. The rule that banks must hold their purchased shares for at least 6 months before selling remains unchanged. This means bank investment in share market will remain limited for now.
Overall, the monetary policy for fiscal year 2083/84 is cautiously accommodative rather than too expansionary. It tries to help the economy move forward through banking reforms and policy stability.
AI Disclaimer: This article was originally published on https://bajarkochirfar.com. It has been translated with the help of AI. For the best understanding and accurate facts, we recommend reading the original Nepali version.
