So far, Nepalis were allowed to use the facility only twice a year, acquiring a maximum of US$ 5,000 irrespective of their cause and frequency of travel. [break]
But commoners as well as businessmen can now exchange higher amount after Nepal Rastra Bank (NRB) on Wednesday relaxed the foreign exchange facility against passport.
That is not all. Nepalis holding foreign exchange account can also spend up to US$ 5,000 in a year in convertible currency from the account they hold without seeking any approval of the central bank. “However, they will need to disclose the purpose of their spending,” said NRB Governor Dr Yuba Raj Khatiwada unveiling the new monetary policy for 2012/13.
The central bank pledged such relaxations to the foreign currency account holders after it realized present tight regime, which required account holders to seek NRB´s prior approval for spending their own foreign exchange savings, of discouraging Nepalis from maintaining foreign currency accounts.
TARGETS OF MONETARY POLICY 2012/13
GDP Growth: 5.5%
Inflation: 7.5%
BFI´s deposit growth: 15.1% (to Rs 1,160b)
Domestic credit growth: 16%
Forex reserve: Enough to finance at least 8 months imports
GDP Growth: 5.5%
Inflation: 7.5%
BFI´s deposit growth: 15.1% (to Rs 1,160b)
Domestic credit growth: 16%
Forex reserve: Enough to finance at least 8 months imports
The new monetary policy, however, has dampened the prospect of lending rates going down, something which general public as well as business community have been looking for.
“I have raised the bank rate - the policy rate - by 1 percentage point to 8 percent,” said Dr Khatiwada.
Likewise, in order to contain growing liquidity, NRB has raised the cash reserve ratio (CRR) - money that banks and financial institutions (BFIs) need to maintain at the central bank - by 6 percent for commercial banks and 5.5 percent for development banks from 5 percent each.
This has compelled the BFIs to cede another Rs 9 billion at the central bank. Growing excess liquidity, which has lately jumped to around Rs 100 billion, was the main reason behind the recent drop in interest rates.
“The hike of CRR has raised our cost of fund, hence, tapered the chances of lending rates going down,” said Rajan Singh Bhandari, vice president of Nepal Bankers´ Association.
The central bank also announced that it will soon ask BFIs to insurance small deposits up to Rs 300,000 in a bid to safeguard savings of the petty depositors. So far, BFIs have insured small deposits up to Rs 200,000 only.
Among others, the new monetary policy has targeted to raise domestic credit by 16 percent, increase BFIs´ loans to the private sector by 16 percent and banks´ loans to government by 15.8 percent. “Through such credit flow, we believe the country will be able to generate economic growth of 5.5 percent in 2012/13,” said Dr Khatiwada.
NRB has also targeted to contain inflation at 7.5 percent in 2012/13. It had committed to limit inflation at 7 percent last year as well, but failed, as it averaged at 8 percent.
The central bank has also jacked up the deprived sector lending for BFIs by 50 basis points. Now commercial banks, development banks and finance companies need to lend 4 percent, 3.5 percent and 3 percent of their respective loan portfolio to the deprived sector.
The new monetary policy has committed to formulate National Financial Literacy Policy and Financial Sector Development Strategy to increase people´s access to formal financial services. It has also announced of setting up a new Financial Stability Unit at the central bank to ensure financial stability.
The central bank also announced that it will soon work out base rate and reference rate (of deposit as well as lending rates) in order to implement interest rate corridor policy. As this policy will compel the BFIs to maintain rates within a set band, the central bank says it will largely protect customers´ interest.
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