Rastra Bank to make alterations in the CRR; Upcoming monetary policy looks to solve the problem of lack of investable funds

In order to solve the ongoing problem of investable funds Nepal Rastra Bank has decided to decrease its Cash Reserve Ratio. The Rastra Bank has planned to decrease CRR by 0.5 to 1 point.

Currently, the CRR of Commercial Banks is 6 percent, for Development Bank is 5 percent and for the finance companies is 4 percent. The CRR has remained the same for the past five years.

It has been observed that due to the lack of investable funds, interest rates have been increasing heavily. Despite the measures taken by the financial institutions, they have been failing to generate investable funds. So, Rastra Bank has decided to manage the problem of the lack of funds by decreasing the CRR.

With the decrease in CRR, the Statutory Liquidity Ratio (SLR) will also be changed.

Due to the lack of investable funds, adequate investments have not been made in the productive sectors. Rastra Bank is positive on managing the investable funds by adopting flexibility in the CRR and SLR.

The banking institutions deposits the mentioned portion of CRR in the Nepal Rastra Bank as a security against the deposits in case the bank becomes bankrupt. Similarly, SLR is the portion of total deposits that financial institutions have to maintain as liquid assets such as cash, government securities and precious metals.

For the full knowledge on the Rastra Bank’s decision, we will have to wait for the monetary policy which is likely to be unveiled this week.