Monetary Policy 2079/80

 Monetary policy 2079/80.

1. NRB granted liquidity of 9702.41 arab which was 6242.72 till previous month. 

-This shows that public have no fund to deposit & one of the major cause is lower developmental expenditure by the government.

2. Agriculture sector industry investment by the banks are around 12.28% which was directed to be minimum at 12% by NRB.

- Though Banks have met the requirement but still the import of paddy, wheat etc are taking place. This shows that in investment have been diverted to non-productive sector rather than in agriculture.

3. CD Ratio have been in limit of 90%. It is at 86.66%

- This indicates that lending capacity of the bank has increased but with no deposit from the public. Banks obtaining loan from NRB and distributing to the public causing lending rate higher.

4. 700 MW electricity is about to be added in national distribution line.

- This helps to improve BOP deficit by selling it to other country.

5. Foreign Exchange Reserve to be maintained which is sufficient to purchase goods and services equivalent to 7 month.

- Upto last month we have Foreign Reserve for 6.7 month only. This shows restriction on import to be continue for longer period.

6. CRR have increased from 1% to 4%.

- More amount is blocked at NRB which causing lower money supply in the market.

7. SLR for Commercial Bank at 12%,  Development & Financial at 10%.

- NRB increased the rate causing more money to be kept at vault. This will cause lower liquidity in the market.

8. Land/Housing loan is provided at 40% of FMV outside valley & 30% of FMV inside valley.

- More collateral required to get the same limit of loan as it was provided earlier. This will reduce the lending by the public.

9. 4/12 limit is unchanged.

- Share market isn't about to improve.

10. Fiscal Policy estimated growth rate to be 8% & Inflation to be at 7%.  

- Monetary Policy has estimated to be maintain inflation at 6.5%. This shows that monetary policy supports the fiscal policy.

CENTRAL BANK HAVE ADOPTED CONTRACTIONARY MONETARY POLICY. THE GROWTH RATE OF 8% SEEMS VERY DIFFICULT TO ACHIEVE. COVID & RUSSIA-UKRAINE WAR HAVE TRIGGER INFATION TO RISE WITH REDUCTION IN PRODUCTION ACTIVITES AROUND THE WORD.

--->Rambo Kr. Pandit