Dr Pokharel appointed NPC vice-chair

Dr Pokharel appointed NPC vice-chair
Nepalnews, 11-Apr-2010

The government has appointed Dr Jagdish Chandra Pokharel as the vice chairman of National Planning Commission (NPC), Sunday.

A cabinet meeting held this afternoon appointed Dr Pokharel as NPC vice chair and Dr Ganesh Gurung as NPC member.

The position had fallen vacant after erstwhile vice chairman Yuba Raj Khatiwada got appointed as the governor of Nepal Rastra Bank. Dr Pokharel was backed by Nepali Congress.

Likewise, the government has appointed Bishnu Kumar Agrawal and Nur Pratap JBR as the Nepali Consulate Generals to Czech Republic and Afghanistan, respectively.

Today's cabinet meeting has also appointed Madhav Poudel as the chairman of Employees Provident Fund.

It has nominated Trilochan Uprety for the position of executive committee member on behalf of Nepal of United Nations Office of the High Commissioner for Human Rights (UNOHCHR).

NRB Governor Khatiwada "There will be some fine-tuning in monetary policy"

NRB Governor Khatiwada "There will be some fine-tuning in monetary policy"
Republica, 20-Mar-2010
Prem Khanal

The government on Friday appointed Dr Yuba Raj Khatiwada as the governor of Nepal Rastra Bank, the central bank of the country. Immediately after the announcement, myrepublica.com talked with Dr Khatiwada on current economic problems and his strategies to comfort with them.

How do you feel to be appointed as the governor of Nepal Rastra Bank?

I feel that I am returning to my home where I have spent almost all my career. I am happy that the government has entrusted me with the responsibility of managing the central bank that has been facing some problems in recent months.

Though there was some delay in announcing the appointment, I want to thank the government for providing the opportunity. Given my academic specialization, I am confident that I can contribute a lot in enabling the central bank to deal with the emerging problems in the monetary front by maintaining its stability.

What are the major opportunities and challenges at present?

The confidence that the government has shown on me by providing me the opportunity to bring in changes at the central bank, where there are a lot of rooms for reforms, is a big opportunity for me.

As far as challenges are concerned, the first one is to raise credibility of the central bank by improving its capacity and performances, and enabling it to function professionally.

Likewise, double-digit inflation, high balance of payment deficit and low economic growth rate that all have posed a major threat of stagflation is another challenge of the economy for some time.

So, the challenge is to slightly curb imports of luxurious items through policy reforms but to ensure adequate flow of liquidity in the productive sector that can boost growth rates.

What will be your plans and strategies to deal with the situation?

The strategies will be to take immediate actions to deal with the problems that have been seen in the monetary sector like raising the credibility of the central bank and establishing the central bank´s role as the main advisor to the government. There is also the need of management of human resources by adopting a policy of right man at the right place and boosting the morale of central bank employees.

Likewise, achieving monetary stability by maintaining financial discipline and good governance, increasing financial accessibility to those who have been deprived from such services and initiating groundwork to define the role of central bank in federal state structure are some of my priorities. Selective use of monetary tools to control price rise and boost economic growth will be other strategies of the central bank.

Apart from strengthening the monitoring and supervision capacity of the central bank, there will also be attempts to bring other financial institutions that are not under the supervision of central bank under its net.

How do you see current economic problems?

Yes, there are some problems. But I am confident that all problems are curable provided that there are due treatments in place. I agree that we are not in a position to achieve double-digit growth rate, but we can achieve fiscal and monetary stability.

As far as high inflation is concerned, high expansion of money supply seen over the last two years also contributed to rapid price rise. But we also need to see the supply constraints.

The NRB will be careful that there is no high inflation due to higher money supply and for that there will be some fine-tuning in the monetary policy that includes some restrictions on the loans that go into unproductive and luxurious sectors.

As far the liquidity crisis, I think there is enough liquidity in the economy but it is not coming into banking system. So, the challenges for coming days for the banking system is to adopt policy to mobilize more deposits by strengthening its credibility and I think this is a powerful tool to address the problem of liquidity.

Will there be review in the temporary restrictions on opening up new banks?

The number of bank itself is meaningless.

The real meaning is whether or not there is enough accessibility of common people to banking services and healthy competition in the banking system. If the penetration of banks is low, there can be a review and the number of financial institutions can be increased to match with the rise in economic activities. But the decision should be made on convincing reasons.

There is also a need to strengthen supervision and monitoring capacity of the central bank at least at the same pace of banks´ expansion.

Khatiwada appointed NRB governor

Khatiwada appointed governor
Republica, 19-Mar-2010

Ending nearly two-month confusion and speculations, the cabinet meeting held on Friday has appointed Dr Yuba Raj Khatiwada, Vice Chairman of National Planning Commission, to the post of governor of Nepal Rastra Bank, the top-most position at the country´s monetary authority.

Dr Khatiwada was appointed the vice chairman of National Planning Commission in June 2009.

He was also recommended to the post of governor in 2005 along with Dr Bimal Prasad Koirala and former governor Bijaya Nath Bhattarai. However, the then cabinet chaired by former Prime Minister Sher Bahadur Deupa chose Bhattrai to the post.

Born in August 1956, Dr Khatiwada obtained Ph.D. from Delhi School of Economics on monetary economics in 1993. Khatiwada spent a significant length of his career at Nepal Rastra Bank, where he had entered as an assistance research officer in 1983 and retired executive director in 2008.

Dr Kahtiwada also appointed member of National Planning Commission for nearly two years, starting from October 2002. He also served on United Nations Development Program as its Economic Advisor for Asia Pacific Region between January 2008 to May 2009.

The cabinet also appointed Bidhyadar Malik as the vice-chairperson of Poverty Alleviation Fund, Minister for Information and Communications Shankar Pokharel informed reporters.

In yet another decision the government decided to give the responsibility of printing Machine Readable Passport (MRP) to India.

NRB imposes 25 pc cap on realty loans

NRB imposes 25 pc cap on realty loans
myrepublica, 18-Dec-09
MILAN MANI SHARMA

In a bid to correct the overheated realty market, Nepal Rastra Bank (NRB) on Thursday imposed a cap on the exposure of banks and financial institutions to housing and real estate loans, asking them to limit such exposure to 25 percent of their total investment portfolio by the end of fiscal year 2012/13.

The NRB directive has also instructed banks to limit housing and real estate loan exposure as a share of their total loan portfolio to 40 percent within this fiscal year and to bring it down to 30 percent by the end of next fiscal year.

The new directive requires the banks not to issue loans of more than 60 percent of fair market value of the collateral/project.

As for the real estate sector (which does not include the housing sector) the central bank has asked the lending banks to reduce exposure to 15 percent of total loan portfolio by the end of next fiscal year and to 10 percent by the end of fiscal year 2012/13.

In case banks and financial institutions fail to comply, the central bank has said they will need to provision for the excess amount (above the cap), calculating it on the basis of 150 percent risk weightage.

"This policy measure will not only slow down the realty sector but it could trigger desperate selling, sending the prices downward," Min Man Shrestha, general secretary of Nepal Land and Housing Developers´ Association, told Republica.

Developers said that the change in lending rate policy that the central bank announced on Tuesday has already sparked a rise in housing and real estate loans by at least 2 percentage points. "That has already made housing loans unaffordable to the general consumer," said Shrestha.

Imposition of a cap and compelling the banks and financial institutions to down-size their investment in the sector is certain, on the other hand, to put pressure on land and housing dealers operating with bank loans to repay their loans as soon as possible.

"The central bank´s measure will not only dampen new demand but also intensify pressure to sell. It will drag land prices down," said another developer.

Shrestha also echoed this statement, adding that the new policy measure will mainly hurt small developers and petty investors operating on bank loans with the sole motive of profit-making.

"Since this segment accounts for 45 percent of total land deals and is mainly responsible for the present unnatural price rise, its caving in would force the market to correct," he said. Developers even noted that the impact could be seen as early as within a month.

Consumer inflation eases

Consumer inflation eases
eKantipur.com, 3-Jul-07

As an impact of lower rate of price rise in food materials and appreciation of the Nepali currency, consumer prices grew at 4.6 percent in mid-May.

However, average inflation for the first 10 months of the fiscal year remained at 6.8 percent, says a latest report of Nepal Rastra Bank (NRB).

According to the report on the country's macroeconomic situation for the first ten months, prices of food and beverages rose by 6.1 percent during the period, contrary to a rise of 9.1 percent a year ago.

During the period, the price of spices grew by 20 percent. However, the prices of sugar and related products declined by 16.3 percent, pulses went down by 11.2 percent, grains and cereal products declined by 6.4 percent, vegetables and fruits dropped by 6.4 percent and beverages lowered by 2.3 percent, easing inflation.

Likewise, prices of non-food items and services rose by 3 percent compared to a rise of 9.1 percent of the same period last year. The moderate rise in prices of this group is due to the impact of recent appreciation of the Nepalese currency against the US dollar on imported commodities. According to NRB, Nepali currency vis-à-vis US dollar appreciated by 12.79 percent in mid-May in comparison to mid-July 2006.

The exchange rate of one US dollar stood at Rs 65.70 in mid-May 2007 compared to Rs 72.19 in mid-May 2006. As a result, remittance receipt of the country grew at a slower rate.

NRB report further says that Nepal's external sector did not perform satisfactorily in the first ten months of 2006/07. “Exports fell by 0.3 percent in contrast to a growth of 3.3 percent recorded in the same period last year.”

The central bank has attributed the decline to a number of factors such as deteriorating security condition, frequent bandas, lack of investment friendly climate and power shortages.

While exports to India rose by just 1 percent in the first 10 months, exports to other countries declined by 3.1 percent. In the same period last year, exports to India had grown by 8 percent, and exports to other countries had declined by 5.6 percent.

Likewise, the country's total imports rose by 10.5 percent during the period, whereas it had grown by 16 percent in the same period last year.

Imports from India also increased at a slower rate of 11.4 percent and imports from other countries also rose by 9 percent during the period.