Review of Monetary Policy

Presented at interaction
organized by
IBN Media and Research Pvt. Ltd.

Presented
On
16th July 2017
By
A.R. Bhattarai FCA
Coordinator Banking Committee
CNI
Content
1. Banking Sector Overview
2. Review of 9 randomly selected Banks
3. Expectations
1. Private sectors
2. BFIs
3. NRB
4. GON
4. Monetary policy response
5. Way forwards
Banking Sector Overview
 PAID UP
DATE CAPITAL FUND CAPITAL BORROWINGS DEPOSITS Current Saving Fixed Call Others LIQUID FUNDS INVESTMENTS LOANS & ADVANCES
Jun-15 164,510.61 139,681.85 25,043.46 1,699,075.23 139,570.02 683,837.44 505,991.72 346,656.85 23,019.19 362,719.62 149,959.08 1,319,589.57
Jul-15 162,992.51 140,794.10 12,850.60 1,771,946.15 158,746.16 714,466.16 513,283.02 363,041.66 22,409.16 353,397.28 206,160.48 1,345,671.32
Aug-15 200,899.21 140,842.38 28,264.89 1,761,807.81 140,520.56 720,282.37 513,648.28 363,617.74 23,738.86 305,384.70 241,468.50 1,342,487.18
Sep-15 200,094.41 141,424.05 26,947.97 1,792,039.42 142,009.67 742,886.10 520,582.31 363,050.89 23,510.45 325,886.91 243,161.49 1,355,371.55
Oct-15 197,159.24 142,821.47 27,916.31 1,815,031.64 149,458.52 763,513.34 518,227.46 360,071.30 23,761.02 370,550.20 199,616.86 1,379,914.49
Nov-15 196,694.19 142,557.16 27,217.47 1,821,883.84 147,339.55 760,102.18 513,391.28 377,029.87 24,020.96 346,388.76 227,385.04 1,380,965.74
Dec-15 196,881.22 144,050.69 25,513.45 1,844,443.30 156,492.17 768,154.89 520,113.26 374,880.63 24,802.36 341,211.84 246,333.27 1,389,614.36
Jan-16 196,696.93 151,133.32 28,598.16 1,872,355.10 154,875.26 786,146.80 524,631.99 381,879.15 24,821.89 322,000.86 246,333.27 1,428,763.59
Feb-16 195,872.40 153,947.50 21,633.56 1,920,017.45 160,329.70 808,700.22 518,585.20 407,302.58 25,099.74 389,179.20 231,235.64 1,447,436.95
Mar-16 197,288.03 155,048.25 30,471.53 1,910,355.44 165,922.06 810,280.86 522,194.48 385,747.15 26,210.89 317,172.55 245,355.09 1,494,821.47
Apr-16 203,826.30 157,357.11 38,512.88 1,968,886.14 176,431.22 812,754.17 542,931.59 408,663.00 28,106.16 343,395.12 248,956.99 1,553,968.07
May-16 204,667.18 159,382.47 38,018.17 1,965,367.28 160,071.36 827,785.20 563,207.59 387,431.02 26,872.11 332,155.14 239,087.46 1,567,274.97
Jun-16 205,700.70 161,180.15 38,619.25 2,002,140.77 161,301.44 844,557.06 582,445.54 386,216.11 27,620.61 345,401.61 218,389.94 1,611,218.29
Jul-16 214,892.48 163,370.74 42,822.19 2,107,502.69 185,135.30 875,419.91 617,634.95 401,829.34 27,483.20 385,746.01 218,389.94 1,669,203.04
Aug-16 261,491.96 165,345.07 41,677.63 2,110,949.66 172,433.06 886,046.40 618,399.26 407,231.11 26,839.83 345,185.93 260,907.99 1,678,983.01
Sep-16 261,220.53 165,949.22 45,305.16 2,130,699.27 176,039.82 896,777.17 618,938.21 410,953.17 27,990.91 323,311.62 251,348.88 1,726,084.58
Oct-16 261,834.85 174,297.93 46,363.38 2,185,924.79 183,616.70 925,131.85 631,391.60 416,582.64 29,201.98 362,466.19 244,066.06 1,768,305.49
Nov-16 263,131.12 176,145.44 48,980.27 2,178,871.44 172,930.10 922,526.54 655,483.34 399,160.46 28,771.00 339,023.84 239,128.71 1,793,025.39
Dec-16 264,275.57 179,945.53 43,763.77 2,208,713.68 174,465.04 914,735.53 679,229.72 412,248.03 28,035.36 355,079.31 233,197.98 1,827,083.00
Jan-17 265,136.63 187,244.27 56,421.97 2,254,540.30 180,506.91 909,447.75 709,414.80 425,226.31 29,944.52 354,342.76 234,922.42 1,883,192.29
Feb-17 267,070.22 190,496.81 48,150.94 2,273,679.63 178,720.86 850,022.46 773,664.17 442,951.35 28,320.79 357,447.43 220,179.00 1,917,994.56
Mar-17 269,389.28 193,792.52 37,997.27 2,283,314.18 175,561.29 773,664.17 838,886.05 418,936.60 28,311.57 380,045.02 200,480.17 1,922,428.65
Apr-17 272,680.61 204,108.69 36,233.06 2,284,703.40 171,948.08 804,031.76 900,859.73 379,472.86 28,390.98 379,454.56 193,071.64 1,940,911.84
 Deposit Growth
30.00%

25.00%
24% growth observed during 2015/16
Annualized Deposit Growth is limited to 16% observed
during first 9 months of FY 2016/17

20.00%

15.00%

Annual growth rate 8.4% during FY 2016/17

10.00%

5.00%

0.00%
Jun-15 Jul-15 Aug-15 Sep-15 Oct-15 Nov-15 Dec-15 Jan-16 Feb-16 Mar-16 Apr-16 May-16 Jun-16 Jul-16 Aug-16 Sep-16 Oct-16 Nov-16 Dec-16 Jan-17 Feb-17 Mar-17 Apr-17

-5.00%
MONTHLY GROWTH GROWTH LAST 12 MONTHS
 Deposit Growth 2015/16 and 2016/17
30.00%

25.00% 20% Annualized Growth

24% Growth

20.00%

16% Annualized Growth

15.00%

Negative Growth of Deposits

10.00% 13% Growth 8.4 % Growth

Negative Growth of Deposits

5.00%
Decline in Monthly growth

0.00%
Jun-15 Jul-15 Aug-15 Sep-15 Oct-15 Nov-15 Dec-15 Jan-16 Feb-16 Mar-16 Apr-16 May-16 Jun-16 Jul-16 Aug-16 Sep-16 Oct-16 Nov-16 Dec-16 Jan-17 Feb-17 Mar-17 Apr-17

-5.00%

MONTHLY GROWTH GROWTH LAST 12 MONTHS

 Loan Growth FY 2015/16 and 20116/17
35.00%
32% Annualized growth
Turning point
30.00%

Real Growth of 26%

25.00% Annualized growth of 24%

20.00%
16% Growth within 3 months Real growth 14%
15.00%

10.00% 8% Growth the turning point

5.00%

0.00%
Apr-15 May-15 Jul-15 Sep-15 Oct-15 Dec-15 Jan-16 Mar-16 May-16 Jun-16 Aug-16 Oct-16 Nov-16 Jan-17 Mar-17 Apr-17 Jun-17

-5.00%
MONTHLY GROWTH GROWTH LAST 12 MONTHS
 Loan and Deposit growth
35.00%

Annualized Loan growth by 32%

30.00%

Assets Liability growth gap

25.00%

20.00%

Annualized Deposit Growth by 20%

15.00%

Loan Growth Deposit Growth

10.00%

5.00%

0.00%
Jun-15 Jul-15 Aug-15 Sep-15 Oct-15 Nov-15 Dec-15 Jan-16 Feb-16 Mar-16 Apr-16 May-16 Jun-16 Jul-16 Aug-16 Sep-16 Oct-16 Nov-16 Dec-16 Jan-17 Feb-17 Mar-17

-5.00%

DEPOSITS MONTHLY GROWTH DEPOSIT GROWTH DEPOSIT ANNUALIZED GROWTH Loan MONTHLY GROWTH MONTHLY GROWTH ANNUALIZED LOAN GROWRH
 Growth of Deposit and Capital vs Loans and Advances
2,700,000.00

2,600,000.00

2,500,000.00

2,400,000.00

2,300,000.00

2,200,000.00

2,100,000.00

NRB view credit growth ignoring the capital growth

2,000,000.00

1,900,000.00 Overall CCD gap (including FX deposits) was maintained

1,800,000.00
throughout the period

1,700,000.00

1,600,000.00

1,500,000.00

1,400,000.00

1,300,000.00

1,200,000.00

1,100,000.00

1,000,000.00

900,000.00
Apr-15 Jul-15 Oct-15 Jan-16 May-16 Aug-16 Nov-16 Mar-17 Jun-17

CAPITAL & DEPOSIT LOANS & ADVANCES

 Money Market Vs Loanable Fund

Nepalese Money market is liquid but banks do not have sufficient fund for
lending.

Money Supply Vs Monetary tools Vs Interest Rates

Reserve Ratio Requirement

Money held by Central Bank determine the size of money supply.
Due to non availability of fund to meet private sector demand interest likely to rise further
Open Market Operation
Due to CCD ratio in place Open Market Operation do not increase money supply that can be
used as loanable fund
Discount Rate and Refinancing
Due to CCD ratio in place Open Market Operation do not increase money supply that can be
used as loanable fund. Further, Refinancing is limited so do not impact money supply.
78.00% CCD RATIO

76.00%

74.00%

72.00%

70.00%

68.00%

66.00%

64.00%
Jun-15 Jul-15 Aug-15 Sep-15 Oct-15 Nov-15 Dec-15 Jan-16 Feb-16 Mar-16 Apr-16 May-16 Jun-16 Jul-16 Aug-16 Sep-16 Oct-16 Nov-16 Dec-16 Jan-17 Feb-17 Mar-17 Apr-17

CCD RATIO
 Liquidity
33.00%

31.00%

29.00%

27.00%

25.00%

23.00%

21.00%
Jun-15 Jul-15 Aug-15 Sep-15 Oct-15 Nov-15 Dec-15 Jan-16 Feb-16 Mar-16 Apr-16 May-16 Jun-16 Jul-16 Aug-16 Sep-16 Oct-16 Nov-16 Dec-16 Jan-17 Feb-17 Mar-17 Apr-17

Liquidity
 GROWTH
2,500,000.00

2240 Billion

1699 billion
2,000,000.00

1940 billion
1,500,000.00

Slow growth of deposits Vs incremental capital

1. By retaining earning (Banks did not pay cash dividend)
2. Shareholders used deposits to buy right shares
3. Total impact was more than 100 billion within two fiscal years
1319 billion
1,000,000.00

273 billion
241 Billon

500,000.00
164 billion

-
Jun-15 Jul-15 Aug-15 Sep-15 Oct-15 Nov-15 Dec-15 Jan-16 Feb-16 Mar-16 Apr-16 May-16 Jun-16 Jul-16 Aug-16 Sep-16 Oct-16 Nov-16 Dec-16 Jan-17 Feb-17 Mar-17 Apr-17

CAPITAL FUND PAID UP CAPITAL LOANS & ADVANCES DEPOSITS

 LOAN TIMES CAPITAL
11.00

Highest was 10.4

10.00 Lowest was 9.40

9.51
9.00

8.26
8.00

7.00

6.00

Loan Times Capital fund was lowest at 6.42

5.00

4.00
Apr-15 Jul-15 Oct-15 Jan-16 May-16 Aug-16 Nov-16 Mar-17 Jun-17

LOAN TIMES PAID UP CAPITAL LOAN TIMES CAPITAL FUND

 Interest Rate Structure

Fx Rate has not been considered as the tools to manage interest rates because of NPR/NPR relation
 Deposit Mix

Saving rate was 8%

1,000,000.00

900,000.00

Saving rate was below 3%

800,000.00

Fixed Deposit exceeded saving Deposits

FD rate was above 12%
700,000.00

FD rate was below 8%

600,000.00

500,000.00
FD rate was below 7%

400,000.00

300,000.00
Call rate was above 12%

200,000.00

100,000.00

-
Apr-15 Jul-15 Oct-15 Jan-16 May-16 Aug-16 Nov-16 Mar-17 Jun-17

Current Saving Fixed Call

 Expected Growth Deposit Mix
1200000

1000000
Saving Deposit will grow at reasonably higher rate

800000

Fixed deposit will grow at lower rate but

Exceed saving deposits
600000

400000

Call and Current Deposits will maintain their level

200000

Current Saving Fixed Call Current Growth Saving growth Fixed Growth Call Growth
 Expected Growth of Credit and Deposit
3,200,000.00

3,100,000.00

3,000,000.00

2,900,000.00

2,800,000.00

2,700,000.00

2,600,000.00

2,500,000.00

2,400,000.00

2,300,000.00

2,200,000.00

2,100,000.00

2,000,000.00

1,900,000.00

1,800,000.00
1. Aggregate demand for money likely to increase
1,700,000.00
pushing interest rate upward
1,600,000.00

1,500,000.00
2. Increase in Money supply will not increase loanable fund
1,400,000.00
unless NRB adjust CCD ratio
1,300,000.00

1,200,000.00

1,100,000.00

DEPOSITS LOANS & ADVANCES Expected Deposit Growth Expected Credit Growth
 Composition of Gross Domestic Product
(at current prices)
2058/59 2067/68 2068/69 2069/70 2070/71 2071/72 2072/73R 2073/74P
NSIC Industrial Classification
2001/02 2010/11 2011/12 2012/13 2013/14 2014/15 2015/16 2016/17
A Agriculture and forestry 36.92 36.68 34.82 33.40 32.16 31.27 31.13 28.89
B Fishing 0.49 0.38 0.40 0.42 0.48 0.47 0.51 0.48
C Mining and quarrying 0.48 0.54 0.57 0.61 0.60 0.60 0.59 0.63
D Manufacturing 8.50 6.24 6.34 6.35 6.20 6.03 5.72 5.67
E Electricty gas and water 2.06 1.24 1.22 1.30 1.17 1.12 1.02 1.16
F Construction 6.49 6.93 6.86 6.93 6.93 7.06 6.82 7.18
G Wholesale and retail trade 14.59 13.90 13.79 14.54 14.90 14.69 14.10 13.52
H Hotels and restaurants 1.61 1.63 1.76 1.89 1.94 2.05 2.00 1.98
I Transport, storage and communications 7.87 8.20 8.51 8.90 8.55 8.37 8.08 8.11
J Financial intermediation 2.75 3.88 4.07 3.93 4.36 4.64 5.20 5.40
K Real estate, renting and business activities 8.23 8.23 8.57 8.81 8.40 8.47 9.23 9.90
L Public administration and defence 1.63 1.92 2.13 2.04 2.43 2.61 2.54 3.00
M Education 4.69 5.25 5.69 5.79 6.33 6.56 6.83 7.23
N Health and social work 1.04 1.32 1.42 1.41 1.52 1.67 1.63 1.74
Other community, social and personal service
O activities 2.66 3.64 3.86 3.67 4.04 4.39 4.57 5.09
 Annual Growth Rate of GDP by Economic Activities
(at constant prices)
2058/59 2067/68 2068/69 2069/70 2070/71 2071/72 2072/73R 2073/74P
Industrial Classification
2001/02 2010/11 2011/12 2012/13 2013/14 2014/15 2015/16 2016/17
A Agriculture and forestry 3.01 4.49 4.58 1.07 4.54 1.00 -0.19 5.25
B Fishing 8.71 5.88 7.53 2.71 4.90 7.09 11.76 6.86
C Mining and quarrying 8.79 2.01 5.03 1.98 11.85 2.34 -2.78 8.19
D Manufacturing -5.32 4.05 3.63 3.72 6.28 0.37 -8.00 9.70
E Electricty gas and water 11.37 4.43 8.30 0.28 3.27 0.78 -7.40 12.97
F Construction 6.41 4.79 0.22 2.45 9.08 2.85 -4.36 11.66
G Wholesale and retail trade -11.57 1.41 3.50 7.25 10.89 2.42 -2.54 9.76
H Hotels and restaurants -18.23 6.20 7.38 5.50 6.77 3.33 -9.68 7.09
I Transport, storage and communications 8.37 5.21 8.10 7.65 5.24 6.23 2.02 6.50
J Financial intermediation 3.82 3.30 3.47 -0.91 3.70 2.91 8.55 6.72
K Real estate, renting and business activities -4.89 2.25 2.97 5.19 3.64 0.77 3.72 5.27
L Public administration and defence 36.85 3.85 3.67 5.53 5.04 8.84 2.52 9.64
M Education 21.05 3.01 5.58 5.92 4.81 5.09 7.04 4.21
N Health and social work 7.38 5.02 6.43 4.48 4.50 11.37 3.25 6.58
O Other community, social and personal service activities -8.62 7.11 6.36 4.79 4.77 12.52 3.67 5.88
Agriculture, Forestry and Fishing 3.08 4.51 4.63 1.10 4.55 1.10 0.03 5.29
Non-Agriclture -1.06 3.64 4.53 5.01 6.41 3.89 0.16 7.74
Total GVA including FISIM 0.46 3.94 4.57 3.64 5.77 2.95 0.11 6.93
Financial Intermediation Services Indirectly Measured
(FISIM) 10.66 6.14 3.50 0.72 7.10 2.41 2.55 6.62
Gross Domestic Product (GDP) at basic prices 0.16 3.85 4.61 3.76 5.72 2.97 0.01 6.94
Taxes less subsidies on products -0.47 -1.16 6.68 8.16 8.88 6.93 4.40 12.80
Gross Domestic Product (GDP) 0.12 3.42 4.78 4.13 5.99 3.32 0.41 7.50
 Review of 9 randomly selected Banks
Banks name under review will not be disclosed,
Sources of information NRB Monthly statistics
Among 9 bank two banks have CCD above 80%,
Some Banks are heavily dependent on short-term call deposits and
institutional deposit (which is about 70% of total deposits),
Some banks maintained nominal fixed deposits,
Impact on Banking
Banks maintaining higher saving deposits will suffer more due to ongoing
interest rate war.
 -
5,000.00
10,000.00
15,000.00
20,000.00
25,000.00
30,000.00
35,000.00
40,000.00
-
2,000.00
4,000.00
6,000.00
8,000.00
10,000.00
12,000.00
14,000.00
16,000.00
18,000.00
20,000.00
Jun-15
Jun-15
Jul-15
Jul-15
Aug-15
Aug-15
Sep-15
Sep-15
Oct-15
Oct-15
Nov-15
Nov-15
Dec-15
Dec-15

Current
Current
Jan-16
Jan-16
Feb-16
Feb-16
Mar-16
Mar-16
Apr-16

Saving
Saving
Apr-16

Bank 3
May-16 May-16
Bank 1

Jun-16 Jun-16
Jul-16 Jul-16

Fixed
Fixed
Aug-16 Aug-16
Sep-16 Sep-16
Oct-16 Oct-16

Call
Call
Nov-16 Nov-16
Dec-16 Dec-16
Jan-17 Jan-17
Feb-17 Feb-17
Mar-17 Mar-17
Apr-17 Apr-17

-
-

5,000.00
10,000.00
15,000.00
20,000.00
25,000.00
30,000.00
2,000.00
4,000.00
6,000.00
8,000.00
10,000.00
12,000.00
14,000.00
16,000.00
18,000.00

Jun-15 Jun-15
Jul-15 Jul-15
Aug-15 Aug-15
Sep-15 Sep-15
Oct-15 Oct-15
Nov-15 Nov-15
Dec-15 Dec-15
Current
Current

Jan-16 Jan-16
Feb-16 Feb-16
Mar-16 Mar-16
Saving
Saving

Apr-16 Apr-16
Bank 4
Bank 2

May-16 May-16
Jun-16 Jun-16
Jul-16 Jul-16
Fixed
Fixed

Aug-16 Aug-16
Sep-16 Sep-16
Oct-16 Oct-16
Call
Call

Nov-16 Nov-16
Dec-16 Dec-16
Jan-17 Jan-17
Feb-17 Feb-17
Mar-17 Mar-17
Apr-17 Apr-17
 -
-

10,000.00
20,000.00
30,000.00
40,000.00
50,000.00
60,000.00
70,000.00
5,000.00
10,000.00
15,000.00
20,000.00
25,000.00
30,000.00
35,000.00
Jun-15 Jun-15
Jul-15 Jul-15
Aug-15 Aug-15
Sep-15 Sep-15
Oct-15 Oct-15
Nov-15 Nov-15

Current
Current
Dec-15 Dec-15
Jan-16 Jan-16
Feb-16 Feb-16
Mar-16 Mar-16

Saving
Saving
Apr-16 Apr-16

Bank 7
Bank 5

May-16 May-16
Jun-16 Jun-16
Jul-16 Jul-16

Fixed
Fixed
Aug-16 Aug-16
Sep-16 Sep-16
Oct-16 Oct-16

Call
Call
Nov-16 Nov-16
Dec-16 Dec-16
Jan-17 Jan-17
Feb-17 Feb-17
Mar-17 Mar-17
Apr-17 Apr-17

-
-

10,000.00
20,000.00
30,000.00
40,000.00
50,000.00
60,000.00
5,000.00
10,000.00
15,000.00
20,000.00
25,000.00
30,000.00
35,000.00
40,000.00
45,000.00

Jun-15 Jun-15

Jul-15 Jul-15

Aug-15 Aug-15

Sep-15 Sep-15

Oct-15 Oct-15

Nov-15 Nov-15

Dec-15 Dec-15
Current
Current

Jan-16 Jan-16

Feb-16 Feb-16

Mar-16 Mar-16
Saving
Saving

Apr-16 Apr-16
Bank 8
Bank 6

May-16 May-16

Jun-16 Jun-16

Jul-16 Jul-16
Fixed
Fixed

Aug-16 Aug-16

Sep-16 Sep-16
Call
Call

Oct-16 Oct-16

Nov-16 Nov-16

Dec-16 Dec-16

Jan-17 Jan-17

Feb-17 Feb-17

Mar-17 Mar-17

Apr-17 Apr-17
 Bank 9
60,000.00

50,000.00

40,000.00

30,000.00

20,000.00

10,000.00

-
Jun-15 Jul-15 Aug-15 Sep-15 Oct-15 Nov-15 Dec-15 Jan-16 Feb-16 Mar-16 Apr-16 May-16 Jun-16 Jul-16 Aug-16 Sep-16 Oct-16 Nov-16 Dec-16 Jan-17 Feb-17 Mar-17 Apr-17

Current Saving Fixed Call

 Expectations

1. Private sectors
2. BFIs
3. NRB
4. GON
 Monetary policy should

1. Provide basis of interest rate predictability,

2. Improve capacity to forecast liquidity conditions and actively
preempt inflation pressure,
3. Develop greater understanding of channels of transmission of
monetary policy,
4. Move towards transparency,
1. Limiting the use of discretionary approach.
2. Using rule based approach to make it more predictable to bring financial
stability.

5. Incorporate expectations of private sector.

 Private sector expatiations
1. Ease out liquidity,
2. Redefine priority sectors,
3. Regulate unwarranted
increase in interest rates,
4. Ease FDI approval process,
5. Facilitate Foreign trade,
6. Move towards capital
account convertibility,
7. Monitor interest spread,
1. No action taken to ease out liquidity.
2. Added New Segments but many left out.
(Increased limit to 25%)
3. No action taken, Interest likely to increase further.
4. FDI approval process has not been shorten.
5. Demand for discounting import L/C bill had not
been addressed. (This will increase local currency loan demand)
6. Do not provide any indication about it, though
governments financial sector strategies is
marching towards capital account convertibility.
7. NRB had initiated steps to review the spread.
 Private sector expatiations
1. Increase fund for refinancing, 1. Increased to 20 billion but not sufficient.
2. Implement Liquidity ratios 2. CCD relaxation period had been extended
instead of CCD ratio, for three months.
3. Increase the minimum amount
for consortium loan to single
obligor limit, 3. Not addressed.
4. Start the process to draft
Commercial Transaction Act 4. Not addressed.
to create charge on trade
debtors
5. Remove the restriction on 5. Some relaxation has been provided to HP
consumer financing loan and Home Loan but not for personal
overdraft.
 Purposeless Policy Response
To restrict overall Margin Loan exposure of a bank to 40% of its Core
capital and 10% of core capital against shares of a listed company.
Current exposure of banking sector is 38 billion which is about 13% of
outstanding core capital of banking sector.

Initiate Prompt Corrective action as per Basel III liquidity norm

NRB still follow CCD norms (it will be redundant).

Composition of Deposits
Sudden increase in individual deposits (to the extent of 125 Billion) cannot be
anticipated.
 Monetary policy response
Achieve growth target of 7.2%.
Achieve private sector credit growth by 20%.
Contain inflation at 7%,
Increase broad Money supply by 18%.
No changes in Bank rate, CRR and SLR
No changes in CCD ratio (80%)
No changes in Capital Conservation Buffer and Counter Cyclical Buffer (2.5%)
Implementing Prompt Corrective Action as per Basel III.
Disclosure of noncompliance of minimum capital requirement and restrictions
on dividend, Bonus Share distribution, deposits collocation and force merger.
 Monetary policy response
Maintain interest rate corridor of two weeks repo and deposit collection at
5 and 3 percent respectively.
Zero interest loan of 10 million for operating branches at remote location
and addition loan of 10 million for opening 2,500 Accounts on such
location.
Increased refinancing amount to 20 billion without changing refinancing
rate.
Refinancing at 1% for against small and medium commercial loan at certain
districts of province 2 and 7.
Increase mandatory credit exposure limit for priority sector lending to 25%.
Issuing guideline on Environmental and Social Risk Management.
Issuing NFRS Migration Guidelines to Banks & Financial Institutions to
implement NFRS
 Monetary policy response
Mandatory use of account payee cheque for all transactions above
one million.
Obtaining Credit Information of all loan without any limit.
Implementing National Small Value Payment Strategy.
Improving Financial Technology (FinTech) and developing Regulatory
Technology (RegTech).
Limiting use of IRN through the use of ATM or electronic method.
Approval for repartition of dividend up to 100 million is exempted.
 Way Forwards
Central banks acquire a dual role:
1. To assess the conditions at hand and make as sound decisions as their
information and skills allow;
2. To inform and convince the public about the value of their intentions.

Beyond that, however, the implementation of monetary policy in the short-

run and tackling shocks as they occur require the application of judgement.

In both cases, people believe that subsequent regulation will reduce

confusion.
 Way Forwards
While reviewing Monetary Policy, NRB should focus on the
following:-
1. Improve liquidity flow in the system to speed up flow of credit to match
GDP growth target,
2. Introduce appropriate policy to bring down exorbitantly high lend lending
rate,
3. Introduce liquidity ratio 20 percent replacing Credit to Deposit and Capital
ratio,
4. Design a plan to implement Basel III
5. Implement International Financial Reporting Standards (IFRS)
6. Ease FDI approval and foreign trade process,
Thank you