Governor Nepal Unveils Monetary Policy Projecting 8.5 Inflation

Governor Nepal Unveils Monetary Policy Projecting 8.5 Inflation

July 23, 2015, 5:45 p.m. Published in Magazine Issue: Vol: 09 No. -2 July. 03- 2015 (Ashad 18, 2072)

With many ambitious policies, Nepal Rastra Bank (NRB) new governor Chiranjibi Nepal unveiled a new Monetary Policy aiming to limit the annual inflation up to 8.5 percent.

 Among other, Nepal has introduced a new provision requiring ‘A’ level commercial bank to raise their paid up capital to Rs 8 billion from current Rs 2 billion by mid-July 2017.

According to the policy, there need to increase the paid-up capital requirements for the development banks and finance companies.

 The policy says national development banks need s to raise their paid-up capital to Rs 2.50 billion and development bank that have working areas on four to 10 districts to Rs 1.2 billion.

The central bank has said that it brought the new provision to increase the paid up capital of the BFIs to strengthen the capital base of the banking system and ensure financial stability.

 “it is necessary to increase paid-up capital to enhance the capacity of the BFIs. This is prerequisite for for the sound financial health of the banking system,” said NRB Governor Chiranjibi Nepal.

The new policy will likely to tightened monetary policy as the banking system is grappling with excess liquidity for the past one and half years, according to a central bank official.

The banking system has liquidity surplus of around Rs 100 billion, according to NRB." CRR refers to the portion of deposits that a bank has to park in the central bank's vault in cash, while SLR is reserve requirement that a bank has to maintain in the form of cash, gold or other government approved securities.

Nepal too has foreign currency reserved to maintain the import of almost a year.

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