Nepal Rastra Bank (NRB), the central monetary authority of the country on Sunday unveiled the monetary policy for the fiscal year 2017-18. The Kathmandu Post caught up with a banker, private sector representatives and economists for their comments on the policy. Excerpts:

Anal Raj Bhattarai

Coordinator, Banking Committee, Confederation of Nepalese Industries 

The monetary policy has broadened the productive sector by including industries like cement and pharmaceuticals  into it addressing the long pending demand of the private sector. Similarly, it has raised the ceiling of the housing loans to Rs 15 million from Rs 10 million and banks and financial institutions (BFIs) will be able to extend up to 65 percent of the value of the vehicle as credit to auto loan seekers from existing 50 percent. These are the positive aspects of this monetary policy. However, the monetary policy failed to address private sector’s major demand which was to ease the situation of credit crunch. Also, it failed to address the high interest rate prevailing in the market which is hitting the businesses.

Shanker Sharma, Economist

The monetary policy has asked the commercial banks to lessen their dependence on institutional depositors and bring it down to 45 percent. This will increase their dependency on individual deposits making such deposit more scarce and expensive. As a result already high interest rate will further increase.   On the other hand, the policy has decreased loan to value ratio for real estate to 40 percent in Kathmandu Valley. This provision will help in reducing the demand for loan. 

Sashin Joshi

CEO of Nabil Bank

This monetary policy is a continuation of the older policy as no significant changes were introduced. In order to meet the economic growth of 7.2 percent targeted by the government, the policy aims to increase the domestic credit by 28 percent making it slightly an expansionary monetary policy. This will have inflationary pressure from the demand side. But the central bank aims to contain the inflation at 7 percent and there is adequate cushion considering inflation of 4.8 percent at the end of first 10 months of the current fiscal year. Also, the policy’s decision to revert back to old credit to core-capital-cum-deposit ratio is a welcome move. 

Kamalesh Agrawal 

General Secretary, Nepal Chamber of Commerce

Private Sector was expecting expansionary monetary policy from the central bank but it failed to introduce such policy. We were expecting the reduction in cash reserve ratio and bank rate but that didn’t happen. Therefore, the policy is not in line with the government budget which is aiming for the GDP growth of 7.2 percent. Also the monetary policy has failed to address the ongoing situation of credit crunch. Although, the central bank increased the size of refinancing fund to Rs 20 billion from Rs 10.84 billion, it is not adequate. 

Yubraj Khatiwada

Former governor of Nepal Rastra bank

The monetary policy will not be able to address the current situation of credit crunch as major chunk of probable deposit is already converted to capital of the bank after the central bank irrationally forced the banks to increase their capital. The policy’s aim to increase domestic credit by 28 percent is logical to attain the economic growth of 7.2 percent as envisioned by the fiscal policy. But, due to lack of adequate lonable fund, it is difficult to achieve the target.