Monetary Policy for FY 2023/24 out; sets seven targets

Kathmandu / July 23: Nepal Rastra Bank (NRB) has made public the monetary policy for the current fiscal year, 2023/24. The central bank through the policy has dropped the policy rate and kept intact the mandatory cash ratio and the statutory liquidity ratio of banks and financial institutions.

Similarly, the bank rate has remained unchanged, and the bidding rate in deposit collection has decreased.

In view of the internal and external economic scenario, the policy rate has reduced 50 base points to 6.5 per cent. The bank rate has been kept intact at 7.5 per cent while the bidding rate in deposit collection has dropped to 4.5 per cent from 5.5 per cent.

The secondary market transaction and the bidding in the deposit collection will remain open if the weighted interbank interest rate considered the operation target by the Rastra Bank is higher than the bank rate and lower than the deposit collection rate.

Similarly, the provision of the permanent liquidity facility in the bank rate and the overnight liquidity facility in the policy rate has been kept unchanged.

There will be a provision of providing the permanent deposit collection at the lower limit of the interest rate corridor for making the interest rate corridor effective, according to the central bank.

Monetary Policy for FY 2023-24 sets seven targets

The Monetary Policy for the current fiscal year 2023-34 unveiled by the Nepal Rastra Bank today has set seven various targets.

The structure and targets of the new Monetary Policy seek to maintain the foreign exchange reserve at a level sufficient to cover the anticipated imports of goods and services at least for seven months.

The Monetary Policy has determined its policy rates to be based on the capacity of the foreign exchange reserves to cover imports and the target annual inflation rate. Additionally, the exchange rate of the Nepalese currency against the Indian currency has been maintained as it is.

It targets to keep interbank interest rates within the interest corridor by operating and promoting open market operations based on the position of the operating target.

Similarly, it has set a target of limiting inflation at 6.5 per cent by preventing pressure on prices by the monetary expansion.

The Central Bank has accorded priority to shift the fiscal resources to the productive sector in line with the target of achieving six per cent economic growth set by the budget for the current fiscal year.

The broad money supply is expected to increase by 12.5 per cent and credit to the private sector from banks and financial institutions is likely to go up by 11.5 per cent in the current fiscal year. RSS