Market Watch

NRB penalizes 45 dev banks

Published by Octron on June 7, 2010

Nepal Rastra Bank (NRB) has slapped a penalty of Rs 3 million to 45 development banks and 45 finance companies for not abiding by its direction to invest specific amount in government bond.

The central bank has specified Statutory Liquidity Ratio (SLR) for development banks and finance companies from the current fiscal year to ensure required liquidity.

NRB officials said the penalty amount was calculated on investment deficit amount in the bond at 6.5 percent interest rate.

As per the existing monetary policy, Development Banks and Finance Companies have to maintain SLR at 3 percent and 2 percent of their total deposits respectively. Till mid-January, development banks and finance companies should have maintained their SLR at 2 percent and one percent respectively.

“All development banks and finance companies failing to invest in bonds as required by the monetary policy have been penalized,” Jhapat Bohara, president of Nepal Development Banks´ Association, told myrepublica.com. He demanded the central bank to withdraw the decision of slapping slap penalty to development banks and finance companies.

Ram Shant Shrestha, president of Finance Company Association, said development banks and finance companies could not maintain required SLR due to the government failure in issuing new bonds and persisting liquidity crunch in the country.

Source: Republica

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