“The central bank cannot even think of back-tracking on its policies. I request you not to doubt my commitment,” Dr Khatiwada told bankers at an interaction organized at NRB on Friday.[break]
He said that the recent directives and guidelines that NRB issued were only targeted at managing the market more effectively. “They are not a policy reversal,” he added.
The governor´s statement came mainly because he has been under growing criticism of late from financial sector players for the new rules that he brought in over the last six months.
The criticism started to build up when the central bank made its approval mandatory for banks and financial institutions to open new branches. The guidelines on salary cap for chief executives issued about a month ago and last week´s new guidelines asking banks to limit the interest rate gap between different savings schemes to 2 percentage points have made it louder.
The Nepal Bankers´ Association (NBA) in particular has tagged last week´s guidelines on service charges and savings rate as the central bank´s attempt to control prices and intervene in their operations.
NBA had earlier submitted an objection letter to NRB on the cap the central bank imposed on chief executives´ salaries. It labeled the move as contravening the spirit of open market operations.
Bankers have also been criticizing the governor´s recent statements in which Dr Khatiwada said banks were operating with a high spread rate (gap between deposits and lending) and that was causing lending rates to soar.
They argued that such statements were eroding customers´ confidence in banks and aggravating their grievances.
During the interaction, Governor Khatiwada strongly defended his statements and stance. At the same time, he also assured bankers that the central bank was not thinking about regulating interest rates and other BFI operations.
“I am the person who drafted the policy on deregulating the spread rate. There is no way I´m going to reverse that,” he told the bankers.
As for the guidelines on elimination of hidden costs in banking services and narrowing down the interest rate gap, he said this was a central bank move towards upholding customer rights and interests. “Protecting customer interests is also one of the major duties of NRB. And the guideline was issued to fulfill that duty,” he said.
Dr Khatiwada further said that he was aware of the protracted liquidity crunch in the banking system and would take steps to inject money when time needed.
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