Economy

NRB Gov: Don’t expect loan at low interest

Published by Octron on December 30, 2010

Nepal Rastra Bank Governor Yubaraj Khatiwada said on Tuesday that nobody should expect loan at less than 10 percent interest now. “Given the increased rate of interest on deposits, rise in the interest rate on loans is natural,” said Khatiwada at the meeting of Finance Committee of the legislature parliament. The governor’s statement has come at a time when the loanees are complaining that they are being communicated by banks about the rise of interest rate through SMSs, emails and phone calls.

After the central bank issued guidelines directing banks not to increase the gap between the interest rates on different saving schemes over 2 percent, banks are compelled to increase the interest rate on general saving schemes and subsequently increase the interest rate on loans. The Finance Committee had asked governor Khatiwada and Finance Secretary Rameshwor Khanal to inquire about the complaints on rising bank interest rates. It had also called on them to inquire about NRB’s plan to appoint chief executive officer (CEO) of Nepal Bank Limited (NBL) and its decision to direct Rastriya Banijya Bank (RBB) to pay its CEO itself, as RBB CEO will not be drawing salary under the Financial Sector Reform Programme from April 1.

Responding to the inquiry of lawmakers, governor Khatiwada said higher interest rate was necessary to prevent money from being deposited in Indian banks and used for purchasing insurance schemes of Indian companies. One of the reasons behind the liquidity crisis witnessed in the second half of last fiscal year has been attributed to Nepali people depositing money in the Indian banks due to higher interest rates offered by them. Banks’ liquidity situation is still tight. Finance Secretary Rameshwor Khanal, however, expressed concerns about the way the banks are communicating about the rise of interest rate. “There should be a provision of publishing interest rate quarterly,” said Khanal, who is also an NRB board member. Regarding the complaints of hydropower developers that rising interest rate has made the projects infeasible, both of them stressed on the need for special provision in the budget to limit the interest rate for hydropower sector.

The lawmakers, however, were not positive about NRB’s plan to handover the management of NBL to its board. “It is not the appropriate time for handing over the NBL management to its board,” said Ram Sharan Mahat, former finance minister. “There is a possibility of political intervention right after the handover.” Former NRB Governor Tilak Rawal also echoed with Mahat. “The bank management shouldn’t have been handed over to its board,” said Rawal who represents Madheshi Janadhikar Forum (Lokatantrik). Similar view came from the Maoists too. “Given the intense unionism at NBL, its management shouldn’t have been handed over to its board in such a flexible way,” said Hari Roka, lawmaker of the UCPN (Maoist).

Governor Khatiwada, however, was positive about the future prospect of NBL. “The bank’s financial situation will be in good shape if its non-banking assets are managed well,” said the governor. Currently, NBL’s management is being headed by the central bank official and the NRB has planned to withdraw its team completely within mid-April after appointing the CEO of the bank.

Source: Kantipur

Readers Rating: