Economy, Market Watch

NRB Penalized Nabil Rs. 75 Thousand

Published by Octron on June 25, 2009

Nepal Rastra Bank (NRB) has penalized Nabil bank ltd Rs.75000 for not maintaining Cash Reserve Ratio (CRR). According to the monetary policy, banking and financial institutions should compulsorily maintain CRR 5.5 percent of total deposits.

Nabil bank has maintained low CRR from 12th Magh to 18 Magh 2065 (25 Jan, 2009 to 31 Jan, 2009) hence, has fined Rs. 75036 on Tuesday (23 June, 2009), said NRB’s banking and financial institutions supervision department.

If the bank fails to maintain CRR for the first time, NRB fines according to the inter-bank rate. At present, inter-bank rate is 6.5 percent. Earlier, NRB had fined Bank of Kathmandu Rs. 25073 for the same reason. It had failed to maintain CRR during the month of Ashoj in 2065 B.S. Nabil bank has fined for the first time in CRR issue.

If any bank falls short to maintain CRR, the fine will be levied in three phases. In case the financial institutions fail to maintain CRR for the first time, they will be charged on inter-bank rate (6.5%) and this rate doubles if the same practice is carried out for the second time. Moreover, the penalty charge for the third time will be thrice the inter-bank rate (19.5%).

According to BASEL-II, 20% liquidity should be maintained by the commercial banks. It is thought that this liquidity limit has also created complexity to maintain CRR. Earlier, bankers association has appealed NRB to decrease CRR ratio by 1 percent citing the liquidity problem in the market. If CRR is decreased by 1%, Rs. 4 billion liquidity will be accessible in the market.

NRB has also penalized banks who failed to provide the loan to rural people. Previously, Nepal Bangladesh Bank Ltd. paid Rs. 1850178 fine to NRB for the same reason, said NRB source. The bank has fined due to the low investment in rural sector during the first quarter of the current fiscal year. There is the provision to invest 3 percent in remote areas of total loan investment made by banks.

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