As a Two-Way Solution to Liquidity Crisis, Nepal Rastra Bank Tightens Policy to Discourage Imports and Loan Forwarding for Imports

Nepal Rastra Bank has issued instructions to further discourage imports.

The central bank has taken a strict policy on import after the country's balance of payments deficit exceeded Rs 1.5 Kharba.

Now, 100% cash margin is required for the import of goods such as sugar and chocolate, cloves, mineral water, alcohol and vinegar, cigarettes and tobacco products, perfumes, cosmetics, wooden goods and accessories, footwear, umbrellas and sticks, marble, cement, plaster, ceramics, gold, and silver. Similarly, a 50% cash margin is required for the import of vehicles (except for electric vehicles).

As a result, the importer will have to keep a cash margin to import these items, hence discouraging their import. Earlier, when the goods worth more than Rs 1 crores had to be imported, the debtor could have invested not more than Rs 1,00,000 financing the rest through bank loans. Furthermore, regular customers and corporate customers did not even have to invest this minimum sum.

Since the letter of credit has to be opened with a 100% margin and the same margin deposit is used when the importer has to pay, banks will not have to give TR loans and short-term loans while making the payment.

This will discourage imports and curb further credit growth, hence serving as a two-way solution to the current problem of liquidity shortage.