Himal Press 
KATHMANDU: The mid-term review of the Monetary Policy for Fiscal Year 2024/25 has elated the banking sector.
The Confederation of Banks and Financial Institutions Nepal, an industry lobby of commercial banks, development banks and financial institutions, had requested Nepal Rastra Bank (NRB) Governor Maha Prasad Adhikari to, among others, reduce loan provisioning on good loans to 1%.
The banking sector has responded positively to the mid-term review of monetary policy which lowered loan provision on good loans to 1% as demanded by the CBFIN.
CBFIN President Upendra Poudyal told Himal Press that the monetary policy review has addressed the issues faced by banks.
The review has introduced a new provision linking the interest rates of microfinance institutions to the base rate starting from mid-May. Additionally, it has increased the limit for primary capital in non-deliverable forwards (NDFs) from the existing 15% to 20%. This was one of the key demands raised by the CBFIN.
“The banking sector is positive about the monetary policy review. However, it cannot be said that all our demands have been addressed,” Poudyal added.
Although the central bank had aimed to maintain the inflation rate at 5% through the monetary policy, inflation has already exceeded this target. Because of this, it was expected that there would be some changes in the policy rate. However, the central bank has kept the rates unchanged with a focus on expanding economic activities.
The current policy rate has been maintained at 5%, the deposit collection rate at 3% and the bank rate at 6.5%. Likewise, the central bank has kept the cash reserve ratio (CRR) and statutory liquidity ratio (SLR) unchanged even though the finance ministry had suggested some changes to these ratios.
The central bank has maintained the loan-to-value (LTV) ratio for personal vehicles and all types of electric vehicles at 60%. While dealers of internal combustion engine (ICE) vehicles have welcomed the move, dealers of electric vehicles are disappointed. This is because people looking to buy ICE cars will now have to make a 40% downpayment compared to 50% in the past, while those looking to buy electric vehicles will have to pay a 40% downpayment compared to 20% in the past.
Nepal Rastra Bank spokesperson Ramu Poudel says that these provisions will bring some improvement to the economic sector. “The monetary policy review has been introduced based on the current monetary system. Some issues will be addressed in the next revision,” he said.
