NRB Removes Cash Margin for LC

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NRB Removes Cash Margin for LC

January 20: Nepal Rastra Bank (NRB) has removed the requirement to have 50 to 100 per cent cash margin for opening letter of credit (LC) to import luxury goods. After the improvement in the foreign exchange reserves, the NRB on Thursday amended the Integrated Circular 2078 to remove the requirement of cash margin for the imports.

From now onwards, the importers need to maintain only the cash margin specified by the banks for opening LC.

Banks take a cash margin of up to 5 percent while opening import LCs considering the risk factor. NRB has also removed the ban on the payment for imports through Demand Draft (DD), and Telegraphic Transfer (TT).

Importers can now pay up to USD 35,000 through TT for the imports from third countries while they can pay up to Rs 300 million through draft and TT for imports from India.

The NRB had fixed the cash margin of 50 to 100 percent earlier to discourage import of luxury goods but gradually eased the restrictions as the situation improved.

The ban imposed by the government on the import of luxury goods has already been lifted.

The central bank was under pressure from businessmen to remove the provision of cash margin. The International Monetary Fund (IMF) also pressured NRB to remove the provision of cash margin for imports.

According to the report of NRB, the foreign exchange reserves were equal to Rs 1215 billion by the end of last fiscal year, which increased by 6.3 per cent and reached Rs 1290 by billion mid-November.

The foreign exchange reserves held by the banks as of mid-November can sustain imports for ten months.

Meanwhile, Nepal Rastra Bank injected liquidity of Rs 3.8 billion  in the market through repo on Thursday.





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