Highlights of Monetary Policy for 2022-23 for Nepal
- Monetary policy stance is cautiously tightened.
- Focus on credit allocation to productive sector, access of MSMEs to credit and withdrawing the measures introduced during the COVID-19.
- The main aim of the policy is to maintain price as well as external sector stability.
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- Policy rate under the interest rate corridor increased by 1.5 percentage points to 7 percent. The floor as well as the ceiling also raised by 1.5 percentage points.
- Broad money supply is projected to grow by 12 percent and private sector credit is projected to grow by 12.6 percent.
- Bank rate increased to 8.5 percent.
- The repo/reverse repo as well as deposit auction under the interest rate corridor have been made rule based under certain conditions.
- Cash Reserve Ratio increased to 4 percent from 3 percent to be made effective from Mid-August 2022.
- Intraday liquidity facility taken by the banks can be extended to overnight by paying bank rate.
- Standing liquidity facility (SLF) for 5 days at bank rate. But outstanding SLF is restricted to 1 percent of deposit at the bank at the end of previous week.
- Provision of Lending of the last resort (LOLR) facility by paying 2 percentage points penal to the bank rate.
- Statutory liquidity ratio(SLR) increased to 12 percent for the commercial banks and to 10 percent for the development banks as well as finance companies.
- Financial relaxations provided during the COVID will be reviewed as per the necessity.
- The recommendations from the Financial Sector Stability Review being carried out with the assistance of the IMF will be implemented.
- Provision will be made to reintroduce the counter cyclical capital buffer from mid-July 2023.
- Provision for the banks to include debenture in deposits will be continued till mid-July 2023.
- Large exposure framework will be prepared to identify the large borrowers of the banks. The existing provision regarding the single obligor limit will be revised.
- Macro stress test framework will be implemented.
- Provision for no additional penal interest rate will be made for the businesses who have taken loans up to Rs. 50 million and are not able to pay the principle as well as interest due by July 2022 if they pay such amount by Mid-October 2022.
- Provision of Interest rate differential will be made for the loans provided to productive sector and commercial sector.
- The Loan to value ratio (LTV) for personal type of loans with no specific purpose mentioned has been reduced to 30 percent for Kathmandu Valley and 40 percent for outside.
- Rs. 40 million cap on margin lending per borrower has been scrapped. However, the cap of Rs. 120 million per borrower still applies. The risk weight for margin loans of less than or equal to Rs. 2.5 million has been reduced to 100 percent from 150 percent.
- Provision will be made for card to card remittance transfer.
- Policy provision will be made for easing foreign direct investment, remittance inflows and external commercial borrowing by the banks.
- The existing provision of cash margin on letter of credit for imports will be gradually reviewed.
- Refinance facility will be directed to productive sector, micro enterprises, export sector and hard hit sector from the COVID-19. The facility will be gradually reduced and will be made equal to the amount available in the refinance fund.
- The micro finance financial institutions are allowed to mobilize debenture equal to their capital fund at maximum.
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