Nepal Rastra Bank (NRB) has introduced monetary policy for the upcoming fiscal year 2018/2019 aimed at addressing the high lending rates in recent months. The monetary policy statement revealed by Chiranjibi Nepal, NRB Governor on July 11 has decreased the normal difference between the deposit rate and lending rate to 4.5% from 5%. Not only has the central bank reduced the interest spread, NRB Governor Nepal also announced that the difference between what a bank pays and charges in interest will be further cut gradually.
“The reduction in reserve requirements for BFIs will help to free up additional cash in the banking system and ease liquidity,” said Chintamani Shiwakoti, Deputy Governor of NRB. “This measure combined with other provisions like reduction in bank rate in the monetary policy will gradually correct the rising interest rates,” he added. The central bank has reduced the bank rate to 6.5% from 7%.
The central bank also announced to provide hedging facility for foreign currency loans that banks bring to the country to expand into productive sectors. Such facility will reduce the high hedging cost for banks in the international market which means that the cost for borrowers who benefit from such funds will also go down.