News Digest: Economy & Development (January 13 – 19, 2022)

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Money and Banking

By introducing a ‘Financial Literacy Framework Directive’ on 17 January 2022, Nepal Rastra Bank (NRB) has made it mandatory for banks and financial institutions (BFIs) to invest at least one percent of their annual profits in financial literary programs to promote e-literacy across the nation. Similarly, NRB has also directed BFIs to prepare and submit their plans for financial literacy programs within the first three months of every fiscal year.

Himalayan Bank (HBL) and Nepal Investment Bank (NIB) have aborted their merger plan. The two banks had signed a Memorandum of Understanding (MoU) for a merger in May 2021 and were anticipated to merge within July 2021. However, during the 29th annual general meeting of HBL held on 14 January 2022, majority of HBL shareholders withheld their consent to the bank’s prior plan. The merger was also rejected due to an intervention from the Employee’s Provident Fund (EPF) of HBL. 

The central bank (NRB) remains indecisive regarding its action on the recent merger fall out between Himalayan Bank and Nepal Investment Bank. As per NRB’s Merger Bylaw 2011, for failing to go into unification despite signing of a MoU, banks can be barred from distributing dividends to their shareholders, prevented from opening new branches, face restriction on transaction of shares in the secondary market and deprived in receiving facilities from regulators and operators. However, NRB is yet to take a concrete decision on the matter.

Nabil Bank is set to acquire Nepal Bangladesh Bank (NBB) via a letter of agreement on acquisition that it received from NRB. As per the agreement, NBB’s 100 points of share is to be equalized to 43 points of Nabil Bank’s share upon the acquisition.

Nepal Oil Corporation (NOC) has issued a press note stating the company’s need to take loans to procure petroleum fuel for the country due to depletion of its accumulated profits.

Trade and Investment

According to the central bank’s ‘Current Macroeconomic and Financial Situation’ report for the first five months of the current fiscal year (FY) 2021/22, merchandise imports has increased by 59.5 percent to reach Nrs. 838.41 billion, with an increment in imports of petroleum products, crude palm oil, medicines, means of transport and spare parts, crude soybean oil and other commodities.

As per a new report published by NRB, remittance inflows have reduced by 6.8 percent to reach Nrs. 388.58 billion during the first half of the current fiscal year (FY) 2021/22. Meanwhile, foreign direct investment (FDI) has increased by 49.6 percent during the same review period.

According to the Financial Comptroller General Office (FCGO), the government fell short in its revenue collection target by Nrs. 17 billion during the first five months of the current fiscal year (FY) 2021/22. In terms of numbers, the government has managed to collect Nrs. 542 billion in revenues as compared to a target of Nrs. 559 billion. Similarly, FCGO also revealed that the government has spent only 13.44 percent of its total expenditure on development projects, much less as compared to the same to the last fiscal year (FY) 2020/21.

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