Highlights of Monetary Policy for 2018/19

KATHMANDU: Nepal Rastra Bank has unveiled the monetary policy for fiscal year 2018-19 earlier today. The major highlights of the policy are presented below:

Highlights of monetary policy 2018-19

– Weighted interest rate spread- 4.5 per cent

– Broad money supply – 18 per cent

– Private sector credit growth 20 per cent, total credit growth 22.5 per cent

– Expansion of refinancing window from Rs 25 bn to 35 bn

– Forward contract facility on exchange rate risk to foreign borrowing of the commercial banks up to 25pc of their core capital

– Commercial banks can also borrow in Indian currency from foreign banks under the foreign borrowing facility

– Cash Reserve Ratio (CRR) to four per cent for commercial and development banks from six and five per cent

– Statuary liquidity ratio 10 per cent, 8 per cent and seven per cent to commercial banks, development banks and finance companies, respectively from 12, 9 and 8 per cent respectively

– Commercial banks must float 15 per cent of the total loan portfolio to the energy and tourism sector

– Full audit of the big branches of the commercial banks mandatory

– Credit rating of borrower that utilise credit of Rs 500 million and above is mandatory

– Margin call only if the stock prices plunge over 20 per cent of the collateral value

– Margin lending only 25 per cent of the stock value taken as collateral

– Ceiling in over draft loan at Rs five million from Rs 7.5 million

– Upper floor of the interest rate corridor minimised at 6.5 per cent and lower floor expanded to 3.5 per cent

– Deprived sector lending 5 per cent of the total loan portfolio for class ‘A’ , class ‘B’ and class ‘C’ financial institutions from earlier 5 per cent for class ‘A’ , 4.5 per cent class ‘B’ and 4 per cent for class ‘C’ financial institutions

– Provision to calculate up to Rs 1.5 million loan in group guarantee for women can be calculated under deprived sector loan and loan to dalit, marginalised community, educational loan, loan against collateral of academic certificates also can be calculated under deprived sector loan

– Only one percentage point can be added in published fixed deposit rate to the interest on institutional deposits

– Cap on institutional deposit for class ‘A’ , class ‘B’ and class ‘C’ financial institutions. Institutional deposit must be narrowed down to 45 per cent and single institutional depositor limit 15 per cent

– Funds collected by the financial institutions through issuance of bond/debenture can be calculated in credit to core capital plus deposit (CCD) ratio

– Presence of commercial banks must in every local unit and the deposit collected in the remaining 116 local units provided relaxation from CRR and SLR calculation for next three years from 2018-19

– Ban on stitching Nepali bank notes

– Deposit up to Rs 3 lakh will be insured from existing Rs 2 lakh

– Issue collateral valuation guidance to keep uniformity in collateral valuation

– Cap on interest of micro finance institutions (MFIs). MFIs can add only 6 percentage point on their cost of fund while fixing lending rates