First Quarter Monetary Policy Review 2022/23
Nepal Rastra Bank released its first quarter review of monetary policy on November 27, 2022. Here is a summary of the measures taken.
Stance and Measures of Monetary Policy
1.
The stance of monetary policy of 2022-23 has been kept unchanged on the basis
of the current economic situation.
2. The targets as well as the projections adopted in the monetary policy of 2022-23 have also been kept unchanged.
3. The monetary instruments adopted in the monetary policy 2022-23 have been kept unchanged. The required reserve ratio has been kept unchanged at 4 percent and the bank rate unchanged at 8.5 percent.
4. Liquidity will be managed in a way that can facilitate smooth payment system, support the targeted credit flows and prevent further pressure on interest rate.
Regulatory Measures
5. A provision will be made whereby the banks and financial institutions can include the investment made in the debenture in the secondary market issued by agriculture-related public limited companies in the specified credit limit to be disbursed to agriculture sector.
6 . The spread rate of commercial banks will be reduced from 4.4 percent to 4 percent and the spread of development banks and finance companies will be reduced from 5 percent to 4.6 percent. It is expected to bring down the premium charged by banks and financial institutions while setting lending rate and maintain balance in lending rate. The provision regarding premium setting will also be regularly monitored.
7. The microfinance financial institutions will be required to publish their base rate on a monthly basis from mid-February 2023.
8. The penalties imposed on the banks and financial institutions in case of the non-compliance of credit to deposit (CD) ratio will be reviewed so as to include the liquidity risk also as the basis of such penalties.
9. The current working capital loan guideline will be amended based on the suggestions received.
10. In view of the current pressure on liquidity, the penalties for the non-compliance of priority sector loan limits will be imposed from mid-January 2024 on the basis of the data of mid-July 2023.
