What is in Half Yearly Monetary Policy Review ?

 

The Nepal Rastra Bank has published its half-yearly review which includes a review of the monetary policy. Some key points from the review and the monetary policy measures taken by the Nepal Rastra Bank have been made public. 

1. The banks and financial institutions were providing daily liquidity facility at 8.5% interest rate, now the over-night liquidity facility is provided at 7% policy rate.

Impact: As per the increase in liquidity, market has seen a decrease in the interest rate gap with the inter-bank interest rate, leading to a decrease in the bank rate by the Nepal Rastra Bank. This has led to a decrease in the interest expenses for the banks.

2. For the easy operation of the small and medium enterprises, an active loan until  Paush 2079 of upto Rs. 2 crore provided from banks and financial institutions  to the industry-business can have new arrangement for restructuring and rescheduling after analyzing cashflow and income of such industry-business until 2080 Asadh.

Impact: Directions can be given for the reorganization and restructuring of the Small and Medium industries to make it more streamlined. The loan taken for this purpose will also be re-evaluated within the framework of the loan mechanism. This situation will provide relief to the Small and Medium industries.

3.  The process of increasing the credit rating of banks and financial institutions involves regularizing and strengthening the classification of loans through loan classification and nosiness arrangement and having a regular loan in the regularized category and being classified in the substandard category with close monitoring. This is being reviewed based on international practice, along with regular training.

Impact: Some restrictions can be made to NPL provisioning after regularization of loan to good and active loan. The exact procedure for recording loans is subject to further instructions.

4. If the interest or principal amount is paid back within one month of the due date, the penalty won't be charged until Jestha end 2080.

Impact: The loan customer will have to pay the penal interest if they do not repay the loan within a month. This means that the due date of the principal amount will increase. This will provide some relief to the loan customers, but if the principal amount is not paid on time, the interest suspense will increase.

Impact on Stock Market:

The Central Bank has not yet had a major impact on the stock market. It is hoped that the stock market will remain stable. However, as the stock market rises, demand increases and this leads to an increase in imports, which in turn affects foreign currency in the country, which is then analyzed by the national bank. Therefore, it is not possible to predict what the national bank's stance on the stock market will be for some time.

The central bank's policy of reducing interest rates is being accepted as the reason for the decline in the stock market. After interest rates are reduced, it is said that the stock market will also improve. The central bank's policy of reducing interest rates will lead to a reduction in interest rates. It is estimated that this will also have a positive impact on the asset market.