KATHMANDU. In a bid to tighten the flow of the finance from the banking sector to the stock market, Nepal Rastra Bank (NRB) has revised a policy to float loans of the bank and financial institutions (BFIs) against the shares pledge. Issuing the monetary policy for the fiscal year 2016/17 today, NRB Governor Chiranjibi Nepal announced the revision on the valuation of the shares which banks accept as the collateral to float their loans.
According to the revised policy, BFIs will be able to float only 50 percent loans on the valuation of average trading price of the shares of last 180 days or latest market price of the share, whichever is low.
The central bank’s latest measure to tighten the flow of the finance toward the stock market has come in the wake of roaring stock market which has been enjoying the cheaper financing facility from the banking system due to ultra low level of interest rates.
Toeing the line of the government in the budget speech of the fiscal year 2016/17, the central bank also projected that the inflation will remain at 7.5 percent in the upcoming fiscal year.
Commercial banks have continued its provision of investing 20 percent of its capital in the productive sector. According to which, the loan being provided for agriculture and power sectors has been hiked from the existing 12 percent to 15.
Similarly, the new policy has made it mandatory for the commercial banks to make at least two percent of their loans to the deprived sector while they can make 3 percent of such loan lending via microfinance institutions.
Since the UML-led government has lost the support of its coalition partner CPN (Maoists Center), NRB governor who was appointed by the Nepali Congress (NC), did not bring in the policy of education lending again st the educational certificate pledges as announced in the budget speech.
Speaking at the ceremony, NRB Governor Nepal, however, said that such policy should not bementioned in the monetary policy. “Bankers are here. They will decide on whether to float such loans. We do not need to state such policy in the monetary policy,” said Nepal.
Similarly, the monetary policy has also announced that the interest corridor system will be phased in in order to stabilize the short-term interest rates volatility.
14 June 2016, My Republica
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