Background
Nepal Rastra Bank has published Semi-annual Review of Monetary Policy for the Fiscal year 2077/2078. The monetary policy for the Fiscal Year 2077/78 was made public on 4th of Shawan 2077. In the midst of the health crisis and economic instability created by the Covid-19 epidemic, monetary policy aimed to contribute to economic recovery by maintaining macroeconomic stability.
The semi annual review report of the monetary policy has been made public considering the economic and financial situation up to 6 months of the current fiscal year, implementation status of the policies and programs mentioned in the monetary policy, semi-annual review of the budget of the Government of Nepal for the current fiscal year and national and international economic scenario.
Here are some major arrangements and changes in the policy:
Foreign Exchange Management
- An arrangement has been implemented for the concerned firm / company / industry to repay the loan in foreign currency in case the business is affected due to COVID-19 and it is difficult to repay the loan installment in foreign currency.
- An arrangement has been initiated to take insurance and transportation related services required in import trade from Nepali service providers.
- Provision has been made to borrow up to 60 percent of the capital or shares investment from Nepali companies or foreign investors of Nepali companies (Parent Company / Group of Companies).
- An arrangement has been made to provide an exchange facility of up to USD 35,000 at a time when importing goods from third countries through draft /Technology Transfer.
- A total of 167 items have been enlisted (adding 3 items) to the list of items to be imported from India by paying in convertible foreign currency through letter of credit(LC).
- Banks, financial institutions and remittance service providers can bring remittances to Nepal electronically and payment services providers in Nepal can make payments in local currency through electronic payment devices (mobile banking, internet banking, electronic cards, wallets, etc.).
Other Monetary and fiscal measures
- The existing mandatory cash ratio, statutory liquidity ratio, and bank rate have been kept unchanged. Arrangements will be made to review the adjustments made in these rates during the unfavorable situation created by COVID-19 as economic activities normalize.
- Necessary arrangements will be made to provide access to special refinancing of hydropower projects smaller than 10 MW.
- The regulatory easing in the monetary policy of the current Fiscal Year has been maintained at a time when the loan-to-collateral price ratio has been fixed for various purposes. As the economic activities become normal, arrangements will be made to review the provisions related to the loan collateral price ratio.
- Banks and Financial Institutions will make the loans to be disbursed in the specified areas and classes special monitoring on the non-receipt of loans by the target areas and classes and if it is found that the loan has been misused, the action to be taken against the concerned will be made more effective.
- In order to encourage electronic payment transactions, timely review of the transaction limits will be done.
- Necessary additional policy arrangements will be made for the promotion of e-commerce including electricity.
- For the promotion of e-commerce, certain expenditure on financial literacy will be calculated under Corporate Social Responsibility.
- As per the provisions of Documents Against Payment (DAP) / Documents Against Acceptance (DAA), the existing limits of foreign exchange provided for import will be reviewed as required.
- Additional policy provisions required for the promotion of electronic transactions including QR Code will be arranged.
