July 6: Nepal Rastra Bank (NRB) has indicated that it will provide loans at cheaper interest rates to the productive sector by prioritizing the manufacturing sector in the monetary policy for the upcoming fiscal year.

Speaking at an interaction program on monetary policy organized by the Nepal Management Association (NMA) on Tuesday, NRB Governor Maha Prasad Adhikari said there was no alternative to boost production, adding that interest rates for the unproductive sectors would rise.

"We have to invest in the productive sector, otherwise we will have to rely on imports," the governor said. He added that despite investment, its economic impact has not been seen.

In the semi-annual review of the current fiscal year's monetary policy, the NRB had stated that among the various types of loans disbursed by banks and financial institutions, the interest rate on loans to the productive sector would be less than the interest rate on loans to other sectors.

To reduce investment in unproductive sectors, NRB has increased the risk weight of loans including, import receipts, real estate loans related to land plotting, personal higher purchase loans and loans of a margin nature.

Adhikari said that the concessions given during the Covid-19 period could not be given continuity.

"During the Covid-19 pandemic, we provided refinancing facilities to run the business. These facilities cannot always be provided," he said. 

 Stating that 50 per cent of the banks’ credit flow has been invested for interest capitalization, Chairman of the Nepal Bankers' Association Anil Kumar Upadhyaya said that the current situation has prevailed due to the arrangements like SLF and refinancing. He emphasized the need for long-term resource management.

Chairman of the Nepal Finance Companies Association Saroj Kaji Tuladhar said that the monetary policy is not the only means for implementing the budget and other state bodies should also be held accountable. He said that the customers were frustrated when they had to fill up separate customer identification forms in each bank and suggested implementing a centralized system.

Chairman of Muktinath Agricultural Company Bharatraj Dhakal urged to review the arrangement of agricultural credit.

Srijana Rana, president of the Hotel Association of Nepal, said that many tourists were coming from India and Bangladesh and urged the banks to facilitate the use of Indian and Bangladeshi currency.

Senior Vice President of the Nepal Chamber of Commerce Kamalesh Kumar Agrawal said that a flexible and balanced monetary policy is needed.