Some measures discouraging: NBA

NEPAL Bankers’ Association (NBA) has said although the new monetary policy seeks to support economic growth, the measures on liquidity and spread rate is “discouraging” for the banking sector. The NBA, however, hailed the reduction in cash reserve ratio (CRR) to 5 percent and statutory liquidity ratio (SLR) to 12 percent for commercial banks. Earlier, commercial banks had to maintain cash reserve ratio at 6 percent and statutory liquidity ratio at 15 percent. “But measures such as prompt corrective action for not maintaining adequate liquidity and spread rate requirement of 5 percent are not good,” said NBA President Rajan Singh Bhandari, making public the NBA’s opinion on the new monetary policy. An NBA meeting held on Sunday concluded that despite the reduction in SLR and CRR, the continuation of the provision that requires maintaining net liquidity ratio at 20 percent would prevent commercial banks from disbursing extra loans. “The provision of prompt corrective action for failing to maintain adequate liquidity is double punishment to banks,” said Bhandari, who is also the chief executive officer of Citizens Bank International. The NBA also sought proper definition of the term “institutional depositors” after the monetary policy announced that banks and financial institutions cannot not take institutional deposits more than 60 percent of their total deposits. The association, however, supported the reduction in interest rate on the refinancing package and the provision of dynamic provisioning. Bhandari said the policy would support the economic growth target of 5.5 percent, but would not help tame inflation to 8 percent. “It will not affect external sectors such as increasing foreign exchange reserves, but will help maintain financial stability,” said Bhandari.