KATHMANDU, FEBRUARY 10Nepal Rastra Bank has introduced flexible provisions in a bid to provide some relief to borrowers. Monetary policy review: NRB gives relief to borrowers TIA takes steps in a bid to provide better services Releasing the half yearly review of the Monetary Policy 2022-23, the NRB has introduced a provision to bar banks and financial institutions from charging penalty if a borrower makes payment of loans along with interest within a month after the expiry of the deadline till mid-June. Arrangements will also be made to allow loans of up to Rs 20 million in the active category at the end of mid-January to be restructured and rescheduled by mid-July after analysing the cash flow and income of the industries and businesses.

This provision is aimed at facilitating the operation of small and medium-sized industries and businesses.The policy mentions that as soon as loans that were categorised as non-performing under the loan classification and loss system are regularised, they will be classified in the good and micro-monitoring categories, etcetera, in accordance with the international best practices.

This is aimed at further strengthening the credit quality of banks and financial institutions.The monitoring of the average interest rate gap between loans and deposits and the premium charged from borrowers to be maintained by banks and financial institutions will be made more effective.Meanwhile, the interest rate of overnight liquidity facility taken by banks and financial institutions from NRB for a very short period has been reduced by 1.5 percentage points through the half-annual review of the monetary policy.The interest rate of the overnight liquidity facility, which banks were getting at an interest rate of 8.5 per cent, has been maintained at seven per cent.The monetary policy has set an objective of maintaining foreign exchange reserves to cover the import of goods and services for at least seven months during the fiscal year 2022-23.

As of mid-January, the country's foreign exchange reserves were sufficient to pay for import of goods and services for 9.1 months.Thus, the earlier provision of cash margin of 50 to 100 per cent when opening a letter of credit for import has been scrapped.The central bank had introduced the provision considering depleting foreign exchange reserves.The policy states that Nepal Rastra Bank Remittance Regulation-2023 has been issued to further organise the work related to remittance business, including the provision of licence for remittance-related business, work and duties of organisations licensed to do business.While the central bank had set the target of limiting the annual average consumer inflation below the threshold of seven per cent for the current fiscal year, it had stood at 8.02 per cent in the first six months.A version of this article appears in the print on February 11, 2023, of The Himalayan Times. .

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