Facilitated Credit Expansion : The Third Review of Monetary Policy
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NEPSE trading
Nepal Rastra Bank has adopted a loose policy after the credit expansion of banks and financial institutions has slowed down.
The Central Bank has announced policies that will help in the expansion of loans in sectors such as vehicles and real estate. While reviewing the monetary policy of the current financial year for the third time, the Central Bank has noted that it has cautiously followed a flexible course of action.
According to the amendment, the existing 125 percent risk load of 'hire purchase' vehicle loans provided by banks and financial institutions has been reduced to 100 percent. This will help in increasing the loan for the purchase of vehicles.
Similarly, the existing loan loss provision for loans classified as good category from banks and financial institutions has been reduced from 1.25 percent to 1.20 percent. As a result, banks allocate less amount for loan loss provision. It has been analyzed that it will be easier to extend credit.
Nepal Rastra Bank estimated the credit expansion of 11.5 percent in this financial year. However, by March, such expansion is around four percent. Businessmen have been saying that due to low credit expansion, economic activity has not increased and new investments have not been added.
It is seen that the National Bank wants to increase the expansion of real estate loans. Through the third review of the monetary policy, it has been announced that the loan payment income ratio for the purpose of purchasing real estate will be simplified and maintained from the existing 50 percent to 70 percent based on the submission of proof of tax payment. This makes it easier to take more loans based on income.
It is seen that the National Bank wants to increase the expansion of real estate loans. Through the third review of the monetary policy, it has been announced that the loan payment income ratio for the purpose of purchasing real estate will be simplified and maintained from the existing 50 percent to 70 percent based on the submission of proof of tax payment. This makes it easier to take more loans based on income.
