New monetary policy is balanced and timely: CBFIN

KATHMANDU: Confederation of Banks and Financial Institutions Nepal (CBFIN) has declared that the monetary policy issued by the Nepal Rastra Bank (NRB) is balanced and timely, addressing the country’s current needs.

In a press statement, the umbrella organisation of commercial banks, development banks, and finance companies in Nepal stated that the new monetary policy is based on an objective study and analysis of the economic and financial sectors, private sector expectations, and the global environment. The policy aims to revive the private sector's morale and confidence, revitalising economic activities that have been stagnant. It includes measures for stability and sustainable development, instilling hope and trust.

Key aspects of the policy include revisions to the Capital Adequacy Framework, reductions in bad loan loss provisions, and allowing some reserves in the regulatory reserve to be counted as Tier 2 Capital. The policy rate has been reduced, the limit for the Regulatory Retail Portfolio (RRP) has been raised, and relief has been provided to construction entrepreneurs. It also facilitates loans to the agriculture and innovation sectors and includes 'variance analysis' in Working Capital Loans Guidelines. The CBFIN expressed hope that these measures would help revive economic activities.

The policy also strengthens microfinance institutions and establishes a separate mechanism for the regulation and supervision of savings and credit cooperatives, boosting confidence in the financial system. The CBFIN welcomed initiatives for the Asset Management Act and the growing use of digital systems in banks and financial institutions (BFIs), including studies related to artificial intelligence (AI) and identifying potential risks.

The CBFIN believes that the infrastructure and institutional structures necessary to fully operationalise the national payment switch will positively impact the economy.

The practical and effective implementation of the monetary policy aims to create a viable business environment and job opportunities, as outlined in the five-year plan and fiscal policy. The central bank must implement flexible monetary policies to ensure stability and sustainable development.

Given the last fiscal year's monetary policy's failure to achieve credit expansion goals, it is crucial to adopt more flexible policies to relieve pressure on liquidity and capital adequacy, ultimately achieving stability and sustainable development, the CBFIN said in the statement.