New Monetary Policy Woos Productive Sector

July 10, 2017

Nepal Rastra Bank unveiled the country’s monetary policy for 2017-18 fiscal on Sunday. The Central Bank’s new policy came as a relief to the deprived ‘productive’ sector, while also easing the cap on auto and home loans.

This is considered as the country’s first such policy that extended credit to the tourism sector.

The new policy directed commercial banks to up their credit by 25 percent (five percentage points) of their total lending, and the development banks by up to 15%, respectively, to the country’s productive sector.

The class ‘A’ financial institutions were asked to extend 10 percent of their total credit to the agriculture sector, 5 percent each to the tourism and hydro power sectors, and 5 percent to other productive sectors.

Under the policy, domestic borrowing is expected to grow to 27.8 percent and lending to the private sector by 20 percent.

The policy also discouraged the corporate deposits in banks and other financial institutions, seeking the fall in ratio of institutional deposits by five percentage points to 45% by the coming fiscal.

The policy also increased the limit on home loans from the existing Rs 10 million to Rs 15 million, effective from July 16, 2017.

Encouraging private vehicle purchasing, the policy also increased loan-to-value ratio on auto loans for private vehicles from the existing 50 percent to 65 percent.

“The hike in auto loan cap will certainly give temporary relief to automobile dealers who have been witnessing tepid sales of private vehicles since the last few months,” says Anjan Shrestha, president of Nepal Automobile Dealers Association (NADA).