The upcoming monetary policy: What do you expect from the team of Dr. Chiranjivi Nepal?

Monetary policy is designed to influence the money supply of the economy in the form of various policies introduced by the central bank. After the announcement of budget for FY 2075/76, the general public is looking forward for the monetary policy which usually brings optimism in the economy.

Monetary policy for FY 2075/76 will be formulated under the leadership of current governor Dr. Chiranjivi Nepal. Dr. Nepal is expected to tackle some of the major issues of banks, financial institutes and capital market. Furthermore, the monetary policy should be aligned with the recently formulated budget by Dr. Yuvraj Khatiwada that has targeted the development of entrepreneurships and highly productive sectors for the betterment of the economy.

Recently, Nepal Banker’s Association has pledged the central bank to withdraw the CCD ratio provision in the coming monetary provisions. The association believes the ratio is no more of a significant importance in today’s context. It has simply been a hindrance in bringing funds from several avenues.

Nepalese banking system has been facing credit crisis throughout the year. The concerned authorities in the banking sectors look forward for the implementation of BASEL III in order to tackle the credit crisis. BASEL III was formulated in response to the credit crisis that could not be tackled by the principles of BASEL II.

Bankers are also willing to decrease the number of commercial banks from 28 to 14-15 in order to establish a stronger capital foundation. The monetary policy is assumed to address this issue as well.

The ballooning interest rate has demotivated business people and entrepreneurs. While the finance minister has presented an entrepreneurial economy vision, the current interest rate has discouraged the creditors. Business person, startups, SMEs and entrepreneurs seek for the interest rate stability in the economy.

The budget policies faced several allegations from capital market participants few weeks ago leading to investors’ strike. The investors in secondary market are wary on how Dr. Nepal will treat the capital market. Investors have demanded for an increment of margin loan from 50% to 80% for their flexibility in investing. The new policies are also expected to cater the requirement of online trading and provision of broker license to banking institutions.

The major interest of investors from the monetary policy lies in implication of method for Capital Gain Tax calculation. Investors have demanded calculation of capital gains tax through average base price instead of current market price. Although Dr. Khatiwada has provided a verbal assurance to the secondary investors, it is yet to be drafted in the pages of the policies.

Finally, Dr. Khatiwada aimed for an inflation rate of 5% by the end of this fiscal year. Monetary policy is therefore responsible for proposing tools that can tackle the problem of hiking inflation rate. Besides, the inflation rate directly hampers the purchasing power of the general public so; Dr. Chiranjivi Nepal is looked upon to bring down the inflation rate and increase the purchasing power of public.

Now that the gateway of foreign loan has been opened by NRB, it should also facilitate the process by stabilizing foreign exchange rate. In order to achieve an economic growth of 8%, the country should build strong fundamentals in trade sector. Hence, Nepalese international traders have anticipations regarding the stabilization of foreign exchange rates through the coming monetary policies.

Although there is a lot for the monetary policy to cover this year, it is yet to be seen which sectors do Dr. Chiranjivi Nepal touch and which sectors are left out. It might be difficult to satisfy each and every participant of the financial system; however, the responsibility of each sector has been loaded on the shoulder of the governor. Dr. Khatiwada faced allegations on his inability to embrace the need of provincial states in the budget. However, will Dr. Chiranjivi Nepal’s innovative approach overcome this limitation from the budget and cater the monetary requirements of each province? 

What are your expectations from the upcoming monetary policy? Please aware other investors in the comment sections below.