The Nepal Rastra Bank on Wednesday, July 24, announced the new Monetary Policy for the Fiscal Year (FY) 2076/77 (2019/20). The central bank has accorded significant priority to promoting bank mergers and achieving the government’s ambitious growth target of 8.5 percent for the upcoming fiscal year.
The key highlights of the Monetary Policy 2076/77 (2019-2020) are:
- The Cash Reserve Ratio (CRR) for domestic banks, commercial banks and financial institutions remains fixed at 4% each.
- Inflation rate for the coming fiscal year 2076/77 has been targeted to 6% from the previous 6.5%
- The Statutory Liquidity Ratio (SLR) for commercial banks, development banks and financial institutions has remained the same as their previous rate at 10%, 8% and 7% respectively.
- The Capital-Cum-Deposit (CCD) for banks and financial institutions are to remain unrevised for FY 2076/77. Currently, the CCD imposed on banks stands at 80%.
- The policy has targeted to expand credit availability to the government and the private sector up by 24% and 1% respectively, from the target of 22.5% and 20% in the last FY.
- The Central Bank has reduced the bank rate from 4.5% to 5% to reduce the interest rate fluctuations.
- The central bank has also eased the regulatory provisions for banks to merge by mid-July 2020. The policy allows merging banks to maintain the spread rate at 4.4 percent and 10 percent for the agricultural sector’s lending and issue debentures within the next two years.
- The Interest Rate Corridor has the following features:
Monetary Policy 2076/77, Nepal Rastra Bank