News Digest Economy & Development (January 27 – February 02, 2022)

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Money and Banking

Nepal Rastra Bank (NRB), on 31 January 2022 fixed the premium amount on interest rate of hire purchase loan being charged by companies. By issuing a directive, NRB has capped the premium interest rate for 4 percent. Similarly, in the same directive, NRB has also made it mandatory for hire purchase companies to maintain a paid-up capital of Nrs. 300 million alongside restricting them from issuing loans of more than 30 percent of their net capital assets to a single borrower.

The International Monetary Fund (IMF) has expressed its dissatisfaction over the central bank’s (NRB) effort and role in ensuring stability in Nepal’s banking sector. While unveiling IMF’s Staff Country Reports on 27 January 2022, the international organization stressed the need to ensure close monitoring of Nepal’s banking system, proper assessment of the effects of any probable deterioration in asset quality, and amending provisions on loan as provided by banks in the country. Likewise, IMF has also suggested NRB to tighten macro-prudential policies to reduce financial vulnerabilities that may arise in the domestic financial market.

The central monetary authority (NRB) on 28 January 2022 sought applications from banks and financial institutions (BFIs) and the general public to subscribe to development bonds worth Nrs. 10 billion. The move was taken by NRB in a bid to raise loans from the domestic market for the government.

Trade and Investment

According to Birgunj Customs Office, export of refined soybean oil, palm oil and sunflower oil has increased to Nrs. 26 billion in the first six months of the current fiscal year (FY) 2021/ 22. Since Nepali traders and industrialist pay no importing fee on import of refined oils, in recent year, imports of soybean, palm and sunflower oil has increase exponentially. Similarly, the customs office also recorded an increase in export of Nepali products to India and other third countries. As per the data, exports from Birgunj Customs Office went up by 186 percent during the first half of the current fiscal, due to an increase in export of goods including refined edible oil, fruits juice and others.

Around 17 companies have applied at the Insurance Board to avail operating licenses of insurers. The companies have applied to receive license to sell policies including life insurance, non-life insurance and micro-insurance. Comparing it to the last fiscal, IB had received license request from only 10 new companies in (FY) 2020/21.

According to recent data from the Department of Customs (DoC), import of cereals increased to reach Nrs. 42.7 billion during the first six months of the current fiscal year (FY) 2021/22. Comparing it to the same time period of last fiscal, cereal import has increased by 1 billion. On the contrary, cereal exports has reduced miserably; concerning for an economy dependent on agriculture.

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