What is your opinion on monetary policy? What do the executive and management leaders say about the monetary policy?

The wait has come to an end! Banks, insurances, mutual funds, microfinance companies, hydro power companies, industrialists, investors, traders, and the general public were awaiting the publication of monetary policies. Banks have been encouraged for merger and acquisition and establishment of broker offices. The microfinance companies’ cap has been altered. Margin lending has been decreased to 25% of the core capital. The economic growth rate to be ascertained for 8% is an opportunity to industrialists. So, ShareSansar tried to understand the views of some of the concerned authorities belonging in sectors such as insurance, banking, hydropower, microfinance, regulatory and stock market.

Here is what they have to say:

Gyanendra Lal Pradhan:

Hydropower specialist and entrepreneur

If I provide an overall view of the monetary policy, the work has been done well. When I segregate the overall policy in a sectoral level, hydro sector has been benefitted the most. The forte of this policy for hydropower lies in the amendment of loan disbursement provision from 5% to 15%. Previously, commercial banks had to meet a minimum of only 5% credit disbursement to hydro power sector. With the new policy, the banks are required to meet 15% of credit disbursement to hydro and tourism sector. This is likely to bring brighter days for hydro sector.

If we further analyze the banking sector, this sector is benefitted with the increased liquidity, interest rate corridor. However, the problems of stock market could have been addressed more effectively. For instance, the reduced proportion of margin lending out of the core capital could have been increased. Stock market, today is a major foundation in Nepalese economy. Although the policy has addressed the stock market to some extent, yet it might not be enough. All in all, the policy is likely to boost economic growth.

Vivek Jha,

CEO, Nepal Life Insurance:

Monetary policy has brought in a very positive view as of now. Undoubtedly, the crisis regarding liquidity in the banking sector has been addressed. However, the question remains: is it for the short term or a longer term? The interest rate turbulence is a major problem in banking economy. The volatile interest rate has affected other several financial institutes associated with the banking sector. For a long term planning, what we require is stability. We have been learning a very popular proverb since our childhood “Prevention is better than cure”. But are the recent policies a long term cure for the banking sector? What I believe is, instead of waiting for a major event to happen, we should rather work on to prevent this event. The prescribed policies will be indeed very handy for the time being but a lot is yet to be done in order to bring a stability that lasts for a longer period of time.

When it comes to insurance sector, we are linked with banking sector. A major chunk of our deposit is in the banking sector. So, we look forward for a longer term interest stability.

Sreejesh Ghimire,

CEO, NMB Capital

Monetary policy has come up with two major priorities. The first focus is on the interest rate stability. The second focus is on attainment of government’s vision at the end of the tenure. The monetary policy has reduced CRR and SLR rate. As a result, banks can manage their capital prudentially. NRB has been trying its best to maintain the interest rate corridor since last three years. The strength of this monetary policy is that it has given consistency to the same objective of interest rate corridor. The decreased CRR and SLR will further increase liquidity in the bank. Although in short run, a major impact will not be seen in the economy, however, in long run, a major achievement of interest stability will be observed. A significant positive impact was not seen after the publication of monetary policy however, I believe, its rather fiscal policy than the monetary policy that is the right tool to address the development of stock market.

Ash Narayan Chaudhary,

CEO, Forward Micro finance

The monetary policy has addressed the problems of microfinance sectors as well. The loan limit for individual level client has increased to 10 lakhs while that for the group clients has increased to 7 lakhs. This will help the microfinance institutes to expand their outreach to the needy areas. Besides, the merger have been encouraged however, the effectiveness of merger depends on the framework which is yet to be developed. The policy regarding 18% interest rate cap can be taken positively. However, when it comes to the current situation of banking sector, this policy might further hamper the micro finance sector. Since, there is liquidity crisis in the commercial banks, while we purchase the product, it’s cost is around 12% to 13%. The operating cost is around 7 to 8%. So, 18% will be a challenge to most of the MFIs. The policy has tried to help the clients of MFIs which is a commendable step. The MFI in the country are charging different interest rates to different clients which impacts the purchasing power of these clients. So, the policy can be beneficial to the clients but the market situation has established it as a challenge.

Gyanendra Prasad Dhungana,

CEO of Nepal Bangladesh Bank and President of Nepal Banker’s Association

The suggestions that we have provided have been accommodated. The policy has addressed interest rate stability. If we view this for a longer term, this is likely to decrease the absence of investment. A good proportion of foreign loan will come into the country due to the ease of policies. In context of stock market, the margin call that has been increased to 20% can also be taken positively as there won’t be panic among investors. All in all, the policy will be in the benefit of the economy.

Niraj Giri,

SEBON’s spokesperson:

Recent monetary policy came up with two to three stock market related policies. In such market, we take these policies in a very positive way. The CRR and SLR related changes will facilitate the interest rate stability. Capital market has been immensely affected due to liquidity crisis in banking sector. Now that the crisis will be addresses, it is rather positive for the stock market. The banking sector has also got approval for broker’s license. This further can be a boost to the stock market. The margin call that has been uplifted from 10% to 20% will also be a major relief to most of the investors. So, I rather take the monetary policy positively and await for the upcoming developments in stock market.

Sandeep Rana

Fundamental analyst and Investor

The major concern of investors was the interest rate in banking sector. With the reduced CRR, SLR and SLF ratio, this is seen as a symbol to create extra liquidity in the economy. It further implies that the interest rate will also be reduced. On the other hand, CCD ratio has remain untouched so, there might not be extra loan fund created in a short span of time. However, since the provision to count debt capital within CCD has been made, this will result in extra 10 arba fund that the bank can disburse as credit. So, in the upcoming days, it will be helpful for bank in terms of both debt and equity.

Similarly, the other problem for investors was the margin call. This is one of the big problems that monetary policy has addressed. For instance, the margin call that has increased to 20% can be a relief to many investors trading on loan. This creates less of panic selling among investors. Besides, the brokers in today’s capital market are limited within the private level. The small size of brokers and most of them within Kathmandu valley has restricted the outreach of the broker houses. With banks entering the brokerage service, investors will get a professional level service. A new positive hope regarding investors in rural areas entering the stock market has also been raised.

Ambika Prasad Poudel,

President of Nepal Investors Forum

I find monetary policy very progressive if I see in a macro level. The strength of this policy lies in banks which have been provided with brokerage services. However, there is always a room for more to do. For instance, the stock market limit that has been decreased from 40% to 25% of the core capital, this suggests that even if liquidity will be in ease in banking sector in the future, the stock market will still have to face challenges. Personal Overdraft loan has been decreased from existing Rs 75 lakh to Rs 50 lakh. This further seems to be a problem for the upcoming days. However, the policy is a mixture of both positive and negative sides.         

These are the concerns of personalities in different sectors of the country. However, our main concern lies in the concern of our general public. How do you view the monetary policy? Do you view it in an optimistic way or a pessimistic way? Do you think monetary policy is a combination of both good and bad? What hopes have the policy brought in you? Please let the comment section be filled with the voice of general public.

ShareSansar is grateful to all the mentioned authorities for their bold views regarding monetary policy.