July 1: NRB has voiced out that inflation is the main challenge of the present time. “The main objective of central banks in the world is to control inflation. If only inflation could be controlled, poverty itself will be eliminated,” said Dr Chiranjibi Nepal, Governor of Nepal Rastra Bank.

He expressed NRB’s seriousness in the growth of inflation rate to 10 percent in 10 months of the current FY along with decrease in arrival of remittance. In a program organised to discuss about upcoming monetary policy, he advised speakers to recommend suggestions considering the country’s interest in the present serious situation.

Divergence between banks and businessmen regarding consortium loan: Bankers and businessmen have diverged on NRB directive of converting multi-banking loans of certain amount to consortium loans within the end of current FY. Earlier, NRB has mandatorily directed the banks to convert multi-banking loans of Rs 500 million and above to consortium loans within the end of current FY.

“The amount of Rs 500 million is too low for current circumstances, it should be raised,” said Hari Bhakta Sharma, Chairman of CNI. He added that if the limit is not raised then more problems will arise in productive sector’s loans. Shanker Prasad Pandey, Chairman of FNCCI-banks, finance and insurance committee, also shared the same views. They have been proclaiming that NRB directive will increase their cost by 2 percent. According to them, the banks will charge the highest interest rate on such consortium loan resulting increase in cost of production, earlier where, the banks used to charge different different interest rate.

Meanwhile, the banks argue that the limit should be decreased. “I would say that the limit should further decrease. Businessmen demand Rs 500 million loans for Rs 250 million requirement which invites multiplier risk in the banking sector,” said Sashin Joshi, former Chairman of Nepal Banker Association. He argues that one bank should manage such loans taking leadership.

NRB is initiating various policies to control multi-banking loans after disclosure of the banking practice where big commercial houses have taken loan of Rs 1-3 billion under multi-banking loans.

In the mean time, businessmen have warned of degrading commercial environment because of the mechanism of submitting the same financial report to the banks to get the loan and to the government to pay tax. According to Kamlesh Kumar Agrawal, General Secretary of Nepal Chamber of Commerce, financial report submitted to tax department and the banks do not fit in together as the financial report submitted to bank for getting loans also includes projection of future progress. However the government formulated the new policy to control the practice of businessmen of submitting financial reports showcasing losses while paying tax whereas they submit financial reports showing profits to get the loans.