November 30: Industrialists of Province 1 have urged the central bank to review its monetary policy stating that the current liquidity crunch faced by banks and financial institutions (BFIs) is a due to the provisions of the monetary policy.
Issuing separate press statements, the Chamber of Industries Morang and the Confederation of Nepalese Industries (CNI) have pointed to the monetary policy for the current fiscal year as the main reason behind the liquidity crisis. They argued that the current crisis emerged after the central bank introduced a provision of 90 percent CD ratio that limited investment. Both the organisations have urged the central bank to scrap the CD ratio.
They have also urged the central bank to fix the interest on loans provided to the productive sector within a single digit in the context of increasing rate of interest at a time when the industries were slowly clawing back to normalcy after a long time amid the Covid-19 pandemic. They argued that the rising interest rates due to the liquidity crunch faced by BFIs have had direct impact on production cost.
They also stated that government has been collecting revenue through various means but its capital expenditure has been extremely low, which is another reason for the liquidity crunch. In this context, they urged the government to make its spending in public sector more effective. They also suggested Nepal Rastra Bank to increase cash flow in the market.
The two bodies of industries also provided a five-point suggestion to NRB which includes transferring the money deposited by the Government of Nepal in the central bank to BFIs for the management of the liquidity crisis.
CNI concluded that the increase in interest rates has caused problems to the industrialists who have invested in the productive sector. It has also requested the central bank to maintain a stable rate of interest until the financial situation of the country improves.