In its mid-term evaluation of the monetary policy released on Friday, the central bank has partially reversed it earlier policy decision to put a temporary ban on issuing new licenses for financial institutions. [break]
Licenses have been opened for rural based financial institutions of Category ´D´ and regional and district level development banks that have already applied to the central bank, said a statement issued by NRB.
Among many policy changes incorporated in the policy, NRB has announced a change in its policy on foreign exchange for Nepalis traveling abroad.
As per the new policy, foreign exchange facility of up to $2,000 will be available only twice in a year whereas such facility was available for unlimited number earlier. Similarly, the mid-term evaluation has announced foreign exchange facility of $500 for those going for foreign employment.
The central bank has also imposed new rules for the import of ´sensitive items´ as unnatural trends were seen in their imports. As per the new rule, only banks under the recommendation of Nepal Bankers´ Association are allowed to import gold up to 10 kg in a day.
Importing banks are allowed to sell the gold only to registered gold entrepreneurs and they would have to forward details of buyers to the central bank on weekly basis. Similarly, the new policy has slapped a 40 percent cash margin in the imports of silver.
- Passport forex facility only two times in a year
- Gold import ceiling fixed at 10 kg per day
- Ban on opening new regional development banks lifted
- Banks allowed to mobilize foreign institutional recourses
- Refinancing against good loan of financial institutions
The evaluation report has also acknowledged that there were weaknesses in the management of liquidity and maintaining a monetary balance between sources and uses of resources. In order to achieve better management of liquidity, the central bank has extended existing maximum maturity period of 28 days for repo and reserve repo to 45 days.
Similarly, NRB has also allowed financial institutions of Category ´A´ to take call deposits as eligible instruments while maintaining Statutory Liquidity Facility (SLF) of 8 percent of the domestic deposits that they are required to invest into government treasury bills.
The mid-term review has also introduced a new refinancing tool for financial institutions against the collaterals of good loans that they own at 7.5 percent interest rate.
Financial institutions taking such refinancing should extend loans to borrowers at rate not more than 10.5 percent. Such loans should be extended only to productive sectors like promotion of exports, power and tourism, according to the evaluation report.
NRB has also lowered the refinancing rate for export sector to 1.5 percent and limited lending rate at up to 4 percent for the financial institutions while extending such loans to borrowers. The central bank has announced to take effective interest spread into consideration while allowing financial institutions to use refinancing facilities.
Likewise, the mid-term evaluation has also squeezed the one-time maximum amount of advance payment for importing goods through drafts/TT from third countries to $25,000.
It has also allowed the financial institutions of Category ´A´ to mobilize institutional resources but those institutions interested in using such facilities are required to take prior permission from the central bank.
Similarly, they have also been allowed to open branches in foreign lands but with due approval from both NRB and the concerned authorities of the country where they aim to open.
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