Nepal Rastra Bank (NRB) Governor Dr Yuba Raj Khatiwada underlined the
significance of Interest Rate Corridor -- a system that sets up a
certain framework to determine the bank interest rates for both deposits
and lending. At a time when interest rates have been fluctuating, Khatiwada expressed commitment to effectively implement the Interest Rate Corridor to bring volatile interest rates back on track.
“We have seen interest rates difference of up to 6 percent within a year due to fluctuation in liquidity level in banking system. We need to introduce the interest rate corridor to regulate interest rates,” Khatiwada said, at an interaction with chief executives of banks on Wednesday ahead of the announcement of monetary policy for the current fiscal year.
The NRB had introduced the concept of interest rate corridor two years ago. The central bank replaced it with ´Base Rate´ -- a benchmark interest rate to be fixed by banks -- in the last fiscal year.
Speaking at the interaction, Rajan Singh Bhandari, president of Nepal Bankers Association, said the central bank should come up with a clear policy to deal with dealing with liquidity issues in the banking system.
Similarly, Ichchha Raj Tamang, president of Nepal Land and Housing Developers´ Association, demanded that the central bank increase the threshold of loan for purchasing land and housing up to Rs 15 million without categorizing it as real estate loan in the upcoming monetary policy.
“As construction cost has increased significantly and land transactions have also improved, the central bank should raise the limit for loan through the upcoming monetary policy,” added Tamang. He also said banks´ investment in real estate is still lower than the allowed limit of 25 percent of total loan portfolio.
According to Tamang, 7,000 units of apartments -- around 40 percent of the total apartments constructed in around 360 housing projects -- have remained unsold due to long running slowdown in the real estate sector.
Chiranjibi Nepal, chief economic advisor at the Ministry of Finance (MoF), said policies to be taken by upcoming monetary policy will be more effective in this fiscal year. “We are hopeful that this fiscal year will see better financial stability with the announcement of full-fledged budget as budget and monetary policy are inter-related in improving financial and economic performance of the country,” Nepal said.
src : republica
