Nepal Rastra Bank has released the monetary policy on Friday. In the context of falling interest rates, the policy has also paid attention to not allowing the real interest rate of deposits to be negative.

The direction of the monetary policy seems to be somewhat flexible to increase the overall demand in the existing easy situation, including strong foreign exchange reserves and low interest rates.

Moreover, what are the new provisions in monetary policy?

• It is projected that the credit flowing to the private sector will expand by 12 percent for the coming year. This means that the National Bank has encouraged credit expansion.
• The bank rate, which is the upper limit of the interest rate corridor, has been reduced from 6.5 percent to 6 and the deposit collection rate, which is the lower limit of the interest rate corridor, has been reduced from 3 percent to 2.75 percent. The policy rate has been reduced from 5 percent to 4.5 percent. This means increasing the money supply in the market and not allowing the interest rate to rise .
• Nepal Rastra Bank bonds will be issued as per the need to make the liquidity management of the structural nature of the banking system effective. As the amount that can be loaned in the market will increase a lot, the National Bank wants to manage it for the long term through bonds.
• The loan limit for construction/purchase of private residential houses will be increased from 20 million to 30 million. Arrangements will be made to maintain the loan-to-value ratio up to a maximum of 80 percent while constructing/purchasing the first house and up to a maximum of 70 percent in the case of others. This arrangement expands the business in the real estate sector .
• Current capital loan guidance will be modified as needed based on the nature of business and loan repayment-income cycle, including agriculture, small and cottage industries, education, health, sports, communication and media houses. Although it is not clear what kind of changes will be made in this, it is said that facilities are given to working capital loans in the mentioned areas.
• The existing loan classification and loan loss arrangement will be studied and reviewed as necessary. It has not been said about what kind of modification.
• Arrangements will be made to provide agricultural or commercial loans up to 10 lakhs. Minimum loan loss will be arranged during the grace period of loans up to 10 lakhs.
• Loans flowing up to 3 crores will be included in the loans flowed to small and medium enterprises, and arrangements will be made to calculate the loans flowed in designated areas. Both of these systems want to provide loans at low interest rates to encourage small agricultural loans.
• will be reviewed in the arrangement related to capitalizing the interest of the loan in the field of energy production . With this arrangement, the borrowers of the hydropower sector will get relief .
• The existing single customer credit limit of margin-type loans flowing from banks and financial institutions to share securities will be increased from 150 million to 250 million. Until now, individual share investors have taken up to 150 million share mortgages, now they can take up to 260 million .
• There will be policy facilitation in the existing system of blacklisting due to check dishonour. It is being tried to simplify the current system, which is blacklisted due to bounced check .
• It will be arranged that the amount of regulatory reserve created for the said asset can be counted as supplementary capital for two years after the bank and financial institution acquires the non-banking asset . This arrangement will relieve the capital fund of banks and financial institutions.
• In order to assist banks and financial institutions in managing non-banking assets and non-banking assets, a draft of the necessary laws and regulations for the establishment of an asset management company will be prepared and submitted to the Government of Nepal. It seems that the process for setting up a property management company will start .
• In the context of strengthening the electronic payment system, the existing branch expansion policy of banks and financial institutions will be reviewed. Now it seems that they want to tighten the expansion of physical branches of banks and financial institutions .
• According to the current arrangement, the existing arrangement regarding the distribution of dividends (cash or bonus) of more than 15 percent per annum will be reviewed. Most of the bonus limits are likely to increase .
• Loans of up to 3 lakhs given to young people going for foreign employment with or without mortgages can be counted as poor class loans and in the case of women, such a limit has been set at 5 lakhs.
• Nepali citizens visiting countries other than India are currently provided with up to 2,500 US dollars per visit, but this facility has been increased to 3,000 US dollars.
• As the contribution of remittance companies to the economy is increasing, such companies will be classified on the basis of capital and turnover.
• Legal and procedural arrangements will be advanced for the establishment of 'Neo Bank' to expand financial access.
• Customer identification (KYC) details of banks and financial institutions and other financial service providers will be facilitated through national identity cards. It will also be facilitated for the development of infrastructure that can be obtained electronically by the necessary agencies after the customer updates the details in one of the banks.