27 July 2024, Kathmandu

The Federation of Nepalese Chamber of Commerce and Industry (FNCCI) has expressed a generally positive reaction to the new monetary policy for the current fiscal year, recently unveiled by Nepal Rastra Bank (NRB).

FNCCI Responds Positively Nepal’s New Monetary Policy

FNCCI President Chandra Dhakal noted that the monetary policy addressed several concerns raised by the private sector, which had been submitted to the NRB. He emphasized that the effectiveness of the policy will depend on the specifics of the circulars issued by the central bank.

Key positive aspects highlighted by FNCCI include:

A target of 12.5% loan expansion for the fiscal year.
Reductions in bank and policy rates.
Flexibility in current capital loan management guidelines.
Lax policies regarding capital fund management for banks and financial institutions.

Similarly, the Nepal Chamber of Commerce welcomed the new policy, describing it as relatively flexible. However, the Chamber pointed out that some issues were not fully addressed.

In a press statement, the Chamber praised the reduction in the bank rate from 7% to 6.5% and the policy rate from 5.5% to 5%, noting that these measures would help lower interest rates.

Additionally, the Chamber highlighted the positive provisions in the policy aimed at promoting the real estate sector.

The Federation of Nepalese Chambers of Commerce & Industry (FNCCI) is a nationally and internationally recognized umbrella organization of the private sector in Nepal.

It is the largest private sector umbrella body in the country, established as a representative body of business organizations. FNCCI represents the interests of the private sector and is involved in promoting the socioeconomic development of Nepal through private sector-led economic growth.

FNCCI Responds Positively Nepal’s New Monetary Policy: Click Here

Nepal Rastra Bank unveiled its monetary policy for 2024–25 today. Governor Maha Prasad Adhikari announced the new policy at Baluwatar, highlighting an inflation rate of 5.5 percent.

The policy includes measures aimed at stabilizing the economy and promoting sustainable growth. Key aspects focus on loan expansion, reduced interest rates, and flexible capital management guidelines to support economic activities.

The announcement has garnered positive reactions from the private sector, which sees it as a step towards addressing their concerns and fostering a conducive environment for business growth.

Monetary Policy: Some Highlights 2081/82

Discover the key highlights of Monetary Policy 2081/82, including an accommodating stance, a target for foreign exchange reserves, projected credit growth of 12.5%, reduced rates with the bank rate at 6.5% and the policy rate at 5%, and no changes to the CRR or SLR. Revisions to the Capital Adequacy Framework, base rate review, and support for the construction sector are also outlined. Provisions to support capital stress include new capital instruments, reduced provisions on good loans, a review of credit buy/purchase risk weight, and increases in the Regulatory Reserve Portfolio and Tier 2 Capital. Additional measures address non-performing loans, working capital variance analysis, MSME ceiling, establishment of an asset management company, removal of the 20 crore cap on margin loans, and increased ceilings on imports through Draft/TT and DAP/DAA.

The monetary policy stance is cautiously accommodating.

The target for foreign exchange reserves is set to cover 7 months’ import of services and merchandise.

Credit growth is projected to be 12.5%.

Rates have been lowered: the Bank Rate is set at 6.5% and the Policy Rate at 5%.

There is no change in the Cash Reserve Ratio (CRR) or Statutory Liquidity Ratio (SLR).

The Capital Adequacy Framework will be revised to align with international practices.

The base rate will be reviewed to ensure effective interest rate transmission.

Several facilities have been introduced to support the construction sector.

Provisions to support capital stress include:

• Introduction of new capital instruments

• Reduction of provisions on good loans to 1.10%

• Review of credit buy/purchase risk weight

• Increase in Regulatory Reserve Portfolio (RRP)

• Inclusion of Regulatory Reserve in Tier 2 Capital

Non-performing loans after regular payments will be upgraded to the Watchlist  and, after 6 months, to the Pass category.

Working capital variance analysis will be provided with an additional timeline effective in Shrawan 2082.

The existing MSME ceiling of 1 cr shall be reviewed.

Asset Management Company (AMC) will be established.

20 crore cap on margin loans to institutions will be removed.

Policies shall be introduced to support various provisions included in the Budget Speech.

The ceiling on imports through Draft/TT will be increased to USD 50k.

The ceiling on imports through DAP/DAA will be increased to USD 100k.