Green Finance for Sustainable Economic Development

Green Finance for Sustainable Economic Development 

  

Introduction

Green Finance refers to the range of innovative financial instruments as well as mechanisms/initiatives that promote green investments. This means more capital flows to sustainable sectors like renewable energy, clean transportation, sustainable water management, etc and less to the unsustainable sectors like mining, coal industry, etc. It is to increase financial flows from banks and financial institutions (public, private and not-for-profit sectors) to sustainable development priorities that have positive and durable environmental externalities. 

A crucial essential about green finance is to generate environmental benefits as part of a strategy to attain inclusive, resilient and sustainable development. The underlying concept is that sustainable financing will lead to sustainable economic growth with better managed environmental and social risks, while also ensuring a better rate of return on the projects. As such green finance covers a wide range of financial product offerings including banking, investment and insurance products such as green bonds, green investment funds, climate risk insurance, etc. Hereby sustainability we mean maintaining a balance between various factors and forces in action, i.e striking a balance between the need and wants of the individuals (being shaped by the cultural, political and economic factors), while also considering their impacts on the environment. 

Fig: Sustainability Pyramid

Global Practices

Green finance has been talk of the town after the declaration of the United Nations Sustainable Development Goals 2015 and the Paris Climate Agreement 2016, which garnered global understanding to the fact that green finance is vital for sustainable economic development .

Since then the practice ensuring that sustainable ventures will get the desired financing and institutions that create hazardous environmental repercussions get the least priority (if not financing at all) has been prevalent. Such practices have been implemented by regional economic blocks, individual countries, investors groups, etc. For eg, regional economic unions like European Union (EU) have made it necessary for companies to reveal their environmental and social policies. Investors have also formed a union based on their common interest in green finance.  For eg, the investor community has come together almost two decades ago adhering to a set of principles known as United Nations Principles for Responsible Investment that covers the environmental, social and governance aspects in their investment policies and practices. Such community at present has 2000 signatories with 81 trillion dollars of the worth of assets and investment.

Similarly countries across the world have formed and implemented a framework that requires the banks to consider environmental and social risks while processing investment projects. However, implementing green financing is not possible through the involvement of a single party/agent. 

Who is responsible?

It is not only the responsibility of the government to ensure that sustainable development measures are adopted. Practical solutions to green finance demands proactive participation of three important stakeholders: Government, Business Enterprises and Citizens.

On the government side, the onus is on the government to develop a regulatory framework and institutional set up that promotes green financing. Similarly from the business side, they must be generous to contribute financial resources to back-up the efforts of the government as the development of eco-friendly infrastructure requires a huge amount of investment from both the government and the private sector. Such investment should be dedicated to the sector of clean energy, transportation, manufacturing, etc which have a direct impact to reduce carbon and other emissions. Similarly, the business community should also encourage research and development initiatives to promote eco-friendly projects, ensure optimum forward and backward linkages with the common interest entities. 

To ensure the longevity of the efforts of the government and the business, citizens should also play a part in their share. This includes awareness and willingness of the citizens to support environment-friendly projects and products from such projects, willingness to pay for such products, desire to work for such firms, and so on. On top of all, the role of global organizations like the United Nations, The World Bank, the European Union, etc is also important as these set the international best practices. 

Nepal's approach to Green Financing

Nepal's concern for sustainable economic development practices dates back to 1950. Before 1950 Nepal revealed its environmental concerns through species conservation and forest use, in 1950-1980 through natural resources conservation and utilization, since 1980’s through policies, and 1985 (from Seventh National Plan) onwards with a focus on Environmental Impact Assessment(EIA), EIA guidelines and in the 1990s through laws. 

Government of Nepal has also accorded due importance to sustainable economic development via formulation of Policies (National Agricultural Policy 2004, Industrial Policy 2011, Climate Change Policy 2011), strategies (Poverty Reduction Strategy 2003, Sustainable Development Agenda, 2000) and programs (National Adaptation Plan of Action 2010), to ensure sustainable economic development. Nepal is a party to the United Nations Framework Convention on Climate Change(UNFCCC), has ratified the Paris Agreement and has also adopted the Sustainable Development Goals. All these initiatives illustrate that we are concerned about environment-friendly development approaches and continuing with this tendency the country has given pivotal importance to green finance.

One of the important stakeholders of green finance are the central bank of the country. As guardians of financial stability, central banks have serious concerns for sustainable development. Effective implementation of green finance initiatives will ensure financial and microeconomic stability mitigating possible risk of high inflation or that of business continuity emanating from climate change or other environmental risks. Hence increase in investment in sustainable and eco-friendly projects has been a topmost priority of the central banks throughout the globe.

Nepal joined the global bandwagon of green finance movement after Nepal Rastra Bank(NRB) became a member of Sustainable Banking Network (SBN), which is a network of central bank and banking associations from emerging markets that was set up in 2012 to foster green and sustainable finance.  NRB has duly recognized sustainability as a central tenet of economic growth. It has demonstrated a strong commitment to environmental sustainability and has integrated principles of sustainable development in its policies and programs. The Unified Directives 2019 issued by the bank  has made it mandatory for licensed banks and financial institutions(BFIs) to undergo Environmental Impact Analysis before disbursing the loan. Similarly, it has also issued Guidelines on Environmental & Social Risk Management for Banks and Financial Institutions 2018. The guidelines aims to establish the Environmental and Social Risk Management Framework as the standard process for evaluation and integration of environmental and social issues in the functioning of banks and financial institutions and requires BFIs to develop and implement an Environmental and Social Management System (ESMS) consistent with local environmental, social laws and regulation, and overtime with recognized international standards such as IFC’s Performance Standards on Environmental and Social Sustainability. The guidelines focus on assessing air emissions and air quality, water use and conservation, wastewater and water quality, solid wastes, labor and working conditions, biodiversity and ecosystem services, culture, and natural heritages, etc.

As a result of these practices, BFIs have started to lend more to the sustainable sectors like electric vehicles, while enforcing stringent lending to hazardous coal based industries, crushers, industries based on fossil fuels, etc. For a country like Nepal, which is all set up to produce surplus clean electricity (more than demand) in the upcoming years, these measures will not only protect our lush natural resources but will also save us a huge amount of currency that goes in importing of fuels. 

Conclusion  

Green finance is certain to gain momentum in the future with most of the countries worldwide focusing on measures to curb pollution and greenhouse effects, and with regulators having placed stringent requirements regarding compliance and disclosure. The need of the time is to revamp existing measures making it more suitable to the local context. While doing so reference of the global best practices should also be taken. Such measures should be able to garner coordination across stakeholders to ensure that green finance efforts are implemented sustainably and comply with international best practices. Incentivizing public financial investments, more awareness across the stakeholders, etc can furthermore promote green financing. Similarly, stakeholders should also be proactive enough to implement the policies and strategies in place. 

All these initiatives will ensure the effectiveness of green finance for ensuring sustainable economic development. For a country like Nepal with robust tourism potential(lush-green resources, varied biodiversity, cultural and historical heritage, etc), implementation of green finance and other practices of sustainable economic development is a must. 

Published in Upahar(Magazine of Economics and Management), Souvenir of Rastriya Banijya Bank Limited, 2076

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Raising Financial Literacy

Amish Dhungel and Dwaipayan Regmi

On observing the lifestyle of the villagers, they seem to have no financial plans. They spend money right away, with no vision for the future, and are in no mood to open a bank account. This vividly represents the poor level of financial planning on account of poor financial literacy.

Financially literate means consumers are able to make wise choices in using financial products, make sound financial decisions, and optimize resources through better financial planning.

With sound financial literacy, individuals can eradicate financial distress in the future. It also means ensuring better financial discipline and making better use of scarce financial resources.

Studies indicate that financial literacy in Nepal is low. Only 45% of the adult population has a bank account, as per the World Bank report of 2017, which indicates a low level of financial literacy, though it could also be because of poor financial access.

Ensuring a greater deal of financial literacy in Nepal requires the active engagement of three parties - regulatory agencies, Banking, and Financial Institutions, and educational institutions.

Nepal Rastra Bank, as a regulatory agency, has shown ample interest in promoting financial literacy.

It has been organizing financial literacy campaigns throughout the country. Similarly, it has been organizing financial literacy programs, celebrating International Money Week, implemented a Clean Note Policy, developed promotional materials relating to financial literacy, adopted stringent Client Protection measures and formulated a financial literacy national strategy.

Similarly, a directive issued by the central bank provides financial literacy and financial consumer protection. It has instructed licensed entities to practice simplified and transparent banking practices and mandatorily organize financial literacy programs.

Following the instructions by the bank, BFIs (banks and financial institutions) have been allocating some of their resources for financial literacy campaigns as part of their Corporate Social Responsibility (CSR).

Similarly, the regulator of the securities market in Nepal, SEBON, is also promoting financial literacy. 

Recently it took membership of OECD INFE (International Network of Financial Education), making it the first organization from Nepal to forge such a partnership. It has also organized an international conference on Financial Consumer protection and financial education in coordination with the OECD.

Another regulatory body in the financial sector that looks after the insurance sector, Rastriya Beema Samiti (Insurance Board), also has financial (insurance) literacy in its agenda. Similarly, insurance companies licensed by the board have also been found organizing insurance literacy programs in the country as part of their CSR initiative. However, the education sector has lagged behind in imparting basic financial knowledge to the students. 

It is important to include financial education in the syllabus of the educational institutions as knowledge and skills transferred at a young age will come handy throughout life. As such, students have little knowledge about general banking skills. They are not taught about saving, investment or entrepreneurship. They don’t have proper knowledge of what the BFIs do. Even though commercial banks have reached almost every local level, people prefer to keep money at home. When the salary gets credited into their account, they rush to the banks the very next day and take out all the money to the last paisa.

The onus lies on the educational institutions to impart financial knowledge to the students. A coordinated approach must be taken by the central bank, Ministry of Education and educational institutions to develop a financial literacy curriculum so that students are not shut out from another life-saving skill. For the time-being educational institutions can launch financial literacy programs themselves, or take the help of the BFIs, which are now present in almost all the local levels. Such initiatives should also be a priority of the local level Gaupalikas and Nagarpalikas. Local-level bodies can inculcate financial literacy not only to the school level students but also to every household by setting up various groups.

Financial literacy is a must for society’s upliftment. The government has made financial literacy and financial inclusion a priority. In addition to bank branches, it has also given priority to use of alternative channels to increase financial access. Likewise, the use of IT-based channels like mobile banking, internet banking, and branchless banking has been gaining popularity in Nepal. All these reveal an increase in financial service access to the customers.

However, supply requires a demand for service delivery to be effective. Stakeholders should consider imparting financial literacy to the targeted customers to ensure that the customers receive the services well. This not only ensures the financial well-being of the customers but also ensures market expansion, capital formation and proper use of scarce resources while strengthening the economic sector and stability. All these help in the sustainable growth of the economy.

Studies indicate that financial literacy in Nepal is low. Ensuring a greater deal of financial literacy in Nepal requires the active engagement of three parties — regulatory agencies, Banking, and Financial Institutions, and educational institutions.

Dhungel is Assistant Director at NRB and Regmi is Assistant Manager at Rastriya Banijya Bank 

Digital Finance Ensures Inclusion

Digital Finance Ensures Inclusion

Financial inclusion can be defined as a state whereby Individuals and businesses have access to meaningful and affordable financial products and services. It means that customers regardless of their geographical location, ethnic, social-cultural, educational, or economic background have access to suitable financial products while ensuring the fairness in service delivery and at a reasonable cost.

The popularity of financial inclusion is because of the role it plays in reducing poverty and boosting prosperity. Financial inclusion is generally measured in terms of access of people and business to a bank account. Having a bank account means that people can save, send and receive payments as such people are connected with one of the important parts of life - Banking. Such an account serves as a starting point for the users to facilitate day to day living, make immediate and long-term financial plans, make use of wide varieties of financial services, etc.

Access

Access to finance at present is not only limited to have a bank account in physical banks. With the use of modern technology in the field of banking and finance, financial services are offered through mobile phones, personal computers, the internet, or via linkage of the card to a digital payment platform is known as digital financial services(DFS). For any product offerings to be called DFS, it should enable the users to perform basic banking functions like payments, savings, borrowings, etc making use of the internet, and without having to go to the physical branch location. DFS is a broad terminology and also includes Mobile Financial Services(MFS) which means the use of a mobile phone to access financial service and execute financial transactions.

Historically financial inclusiveness throughout the globe has been low. The World Bank estimates that around 1.7 billion adults worldwide(or 31% of adults) do not have a basic transaction account. In the case of Nepal around 60% of the population is still said to be outside the coverage of formal banking channels. Low financial literacy, complex KYC requirement, unequal access to infrastructure, convenience in using informal market tools, lack of trust in financial service providers, inadequate financial awareness, etc has excluded a large portion of citizens from the ambit of Banking Industry.

Government of Nepal (GoN) having realized the importance of financial inclusion has introduced measures to increase the access of people to financial services. It has prioritized to open a physical branch of commercial banks at all local levels of the government. As of October, 2019, only 12 local levels out of 753 do not have a physical branch.  All these local levels are likely to have a branch by the end of the current fiscal year. With about 81% of Nepal's population living in rural areas, the increase in the number of banks at the local level will increase the bankable population. Banking at doorstep will create convenience for the users which was a matter of privilege some years back.  Similarly, GoN has launched an opening bank accounts campaign targeting every citizen. To ensure its effectiveness the process of opening bank accounts has been simplified. Opening the bank account earlier required a copy of citizenship but now can be done by presenting a copy of the driving license, national identity card, etc. Similarly, such accounts will receive a deposit of Rs. 100 from the bank's side.

GoN has also introduced 'Digital Nepal' campaign which highlights the role of the Digital Financial Services to promote digitization of financial transactions. It recommends to increase the limit of digital transactions, reduce the cost of digital financial transactions, issue of national biometric card, introduce Telecommunication Company (TelCo’s) into payment industry, etc As such,  Government of Nepal, together with other stakeholders can create an enabling environment to promote digital financial service. For instance, recently Bangladesh introduced 'Digital Bangladesh' campaign which largely increased the financial inclusion in the country. The country in 2018 had 47% of adults in the financial channel, which was a 10% increase from 2017. Such a number has soared up to 60.0% as per a recent study report from Nepal Rastra Bank. Such progress is because of a larger portion of the population having access to Mobile Financial Services(MFS). The growth was possible because of the Government’s financial inclusion strategy via ‘Digital Bangladesh’ that promoted Mobile Financial Services(MFS) like bKash, Rocket, iPay, etc . Such stories can also be found in countries like Kenya (mPesa), China(Alipay,Wechat),etc. Our own homegrown Mobile Financial Service providers like esewa, IME pay, sparrow pay, etc have been gaining momentum.  

A large unbanked population together with a predominantly cash-based economy has been a constant problem to the Nepalese financial system for a long period of time. A solution to both of these can be via an extension of digital financial services throughout the country. With mobile penetration rate greater than 100%, declining cost per unit of data, high-speed internet solutions, expansion of physical infrastructure, 50% of internet penetration rate, etc the environment is supportive for the establishment of a conducive ecosystem of digital financial services. This context is more suitable to popularize mobile financial services. This population base with wide access to mobile and internet can be tapped easily to open a digital wallet that would be game-changing to enhance financial inclusion in Nepal. Licensed mobile financial services providers from Nepal Rastra Bank in the form of PSP’s and PSO’s can tap virgin unbanked population across the country.

  

Digital finance is instrumental to ensure broader financial inclusion. Similarly, in contrast to the traditional brick and mortar banking, digital finance is more affordable and convenient.  The major advantage of digital finance comes from its ability to offer product offerings at an affordable price, ensuring interoperability across various service providers, etc.  It also enables the regulators to easily check/control the flow of black money, or undue financial transactions. Another advantage would be the efficiency factor. The use of innovative digital financial services can have a long-lasting positive impact on banking performance.  

Contribution

Access to digital finance is also more likely to boost the gross domestic product of the economy by providing service users with a wide range of digital finance products and services. Under banked groups like SME’s, women, and the population on the bottom of the pyramid will have access to financial services. This will boost aggregate expenditure leading to a positive contribution to GDP and will also contribute to the reduction of the poverty level. With this collection of government revenues, fees and charges will also increase. As such Government in coordination with other stakeholders should create an enabling legal and physical infrastructure to promote digital finance in the country. Making use of the technology to offer existing banking solutions and leveraging the benefit of technology to offer mobile financial services across the geographical areas will significantly enhance financial inclusion in the country. Such measures will significantly add to the government’s mission of ‘Digital Nepal’.

*Writer is an Assistant Director at Nepal Rastra Bank.

(The article was published in The Rising Nepal, a national English daily of Nepal. )

सार्वजनिक संस्थानहरुको वतर्मान अवस्था र भावी कार्यदिशा

सार्वजनिक संस्थानहरुको वतर्मान अवस्था र भावी कार्यदिशा

नागरिकका लागि अत्यावश्यक वस्तु तथा सामाग्री सर्वसुलभ र सुपथ मूल्यमा उपलब्ध गराउने, सो वस्तु तथा सेवाको उच्च मूल्यवृद्धि हुन नदिने आदि उद्देश्य राखी सार्वजनिक संस्थानहरू स्थापित भएका हुन्छन् । यसका साथै सार्वजनिक संस्थानहरूले स्थानीय स्रोतसाधनको भरपुर उपयोग गर्ने, मुलुकको सन्तुलित विकास गर्ने, उच्च आर्थिक वृद्धिका लागि पूर्वाधार तयार गर्ने, बजारमा निजीक्षेत्रकोे एकाधिकार हटाउने, उल्लेख्य संख्यामा रोजगारी सृजना गर्ने जस्ता कार्य मार्फत लोककल्याणकारी राज्य र आत्मनिर्भर अर्थतन्त्रको निर्माण गर्ने दिशातर्फ अग्रसर हुने लक्ष्य आत्मसात् गरेका हुन्छन् । 

सन् १९९० को दशकमा नेपालमा सार्वजनिक संस्थानहरूको उल्लेख्य संख्यामा स्थापना भएको देखिन्छ । सो समयमा निजीक्षेत्र बलियो नभएको, ठूला पूर्वाधार निर्माणमा निजीक्षेत्रसँग आवश्यक पूँजी तथा अनुभवसमेत कम भएकाले सरकारले विभिन्न मोडालिटी (पूर्ण वा अधिकांश लगानी) मा औद्योगिक, व्यापारिक, सेवा, सामाजिक, जनोपयोगी, वित्तीय आदि क्षेत्रमा सार्वजनिक संस्थानहरूको स्थापना गरेको पाइन्छ । 

संस्थानहरूको अवस्था
अधिकांश सार्वजनिक संस्थान घाटामा सञ्चालित छन् । मुनाफामा रहेको संस्थानहरू पनि एकाधिकार तथा केहीमा हालसालै चालिएका सुधारका प्रयासका कारण सुधारोन्मुख अवस्थामा छन् । यसरी सार्वजनिक संस्थानहरूलाई साविककै व्यवस्थापन संरचना र कार्यसम्पादन अन्तर्गत चलिरहन दिए जनताबाट उठाएको करको दुरुपयोग भइरहने तथा बजेट घाटा बढ्दै जाने निश्चित छ । 

वित्तीय अवस्था 
केही सार्वजनिक संस्थानकोे वित्तीय अवस्था बलियो छ र राजस्व आम्दानीमा ठूलो योगदान दिइरहेका छन् । केही संस्थानमा दैनिक प्रशासनिक खर्च धान्नसमेत सरकारको ढुुुकुटी प्रयोग भइरहेको छ । संस्थानको खर्चमा नियन्त्रण गर्न नसक्नु, भएका व्यवसाय पनि प्रभावकारी रूपमा सुचारू गर्न नसक्नु, नयाँ क्षेत्रमा व्यापार व्यवसायलाई लग्न नसक्नु, उच्च व्यवस्थापनमा उत्तरदायित्व कम हुनु, प्रतिस्पर्धी तवरले विद्यमान बजारका सिद्धान्त अनुरूप कार्य कुशलतामा सुधार ल्याउन नसक्नु, आदि कारणले गर्दा केही संस्थानहरूको क्षमतामा दिनानुदिन कमी आइरहेको छ । आव २०७४/७५ को आँकडा हेर्दा अस्तित्वमा रहेको ३९ संस्थानमध्ये दुई बन्द छन् भने सञ्चालित ३७ मध्ये ११ संस्थान घाटामा छन् । केही संस्थानको उद्देश्य मुनाफाभन्दा पनि जनजीवनलाई चाहिने वस्तु तथा सेवा सरल तरीकामा पु¥याउनु भएकाले नाफाघाटाको हिसाब गर्नु उपयुक्त मानिँदैन । यद्यपि न्यूनतम मुनाफा सार्वजनिक संस्थान सञ्चालनको अनिवार्य शर्त हुनुपर्छ र सो आर्जन गर्नतर्फ संस्थानहरू अग्रसर हुनैपर्छ । 

नीतिगत व्यवस्था
कुनै समयमा ६२ ओटा सार्वजनिक संस्थान रहेकोमा नेपाल सरकारले चलाएको निजीकरणको नीतिले उक्त संस्थानहरूको संख्या घट्दो छ । खुला उदार अर्थतन्त्रको उदयसँगै प्रतिस्पर्धी बन्न नसकेका र सरकारको प्राथमिकतामा पर्न नसकेका संस्थानहरूको संख्या घटी हाल ३९ मा सीमित भएको छ । तिनमा पनि ३७ मात्र सञ्चालनमा छन् । 

सञ्चालनमा रहेको संस्थानहरू विभिन्न ऐन अन्तर्गत स्थापना भएका हुन् । कम्पनी ऐन अन्तर्गत २८ ओटा, संस्थानसम्बन्धी ऐन अन्तर्गत ६ ओटा, सञ्चार संस्थान ऐन अन्तर्गत ३ ओटा र संस्थान ऐन अन्तर्गत २ ओटा संस्थान सञ्चालनमा रहेका छन् । यसरी विभिन्न ऐन अन्तर्गत सञ्चालनमा रहेकाका कारण तिनको सञ्चालन प्रक्रिया तथा प्रावधानहरूमा भिन्नता रहेको पाइन्छ । संस्थान सञ्चालकहरूको संख्या पनि फरक फरक रहेको पाइन्छ । ५ देखि १५ जनासम्म सञ्चालक भएको पाइन्छ । तसर्थ समान प्रकृतिका संस्थानहरूको सञ्चालनका प्रक्रिया तथा प्रावधानमा एकरूपता ल्याउन नीतिगत व्यवस्था गर्न आवश्यक छ ।

तालुक निकाय
सार्वजनिक संस्थानहरूले अर्थ मन्त्रालयका अतिरिक्त आप्mनो तालुक मन्त्रालयमा पनि रिर्पोटिङ गर्नुपर्ने हुन्छ । फरकफरक निकायहरूमा रिर्पोटिङ गर्ने अवस्थाले संस्थानहरूमा ढिलासुस्ती तथा कार्यालय सञ्चालनमा अस्पष्टता आउन सक्छ । अलगअलग सार्वजनिक संस्थानहरूको नियमनकारी निकाय पनि अलग नै रहेका छन् । छरिएर रहेका नियमनकारी निकायलाई एउटा बलियो निकाय अन्तर्गत ल्याउन सके संस्थानहरूको संस्थागत सुशासनको अवस्थामा सुधार आउन सक्ने कल्पना गर्न सकिन्छ । विषयगत मन्त्रालय र अर्थ मन्त्रालयबीच संस्थानको सञ्चालन र व्यवस्थापनका लागि स्पष्ट खाका तयार गरी लागू गरेमा यसबाट संस्थान सञ्चालनमा भइरहेको जटिलता हटन गई सञ्चालनमा सहजीकरण हुन्छ । यसर्थ सार्वजनिक संस्थानहरूको नियमन तथा रिर्पोटिङका लागि एक सशक्त सरकारी निकायको गठन अपरिहार्य छ ।

सञ्चालन मोडालिटी 
यसैगरी संस्थानहरूलाई उनीहरूको उद्देश्य अनुसार वर्गीकरण गर्नुपर्छ । आधारभूत सेवा प्रदान गर्ने, रणनीतिक रूपमा चाहिने तथा निजीक्षेत्रको उपस्थिति नभएका क्षेत्रमा संस्थानहरूमा सरकारी स्वामित्व राखिरहन उपयुक्त हुन्छ भने मुनाफाको उद्देश्य राखिएका तथा पर्याप्त निजी प्रतिस्पर्धी भएका संस्थानहरूलाई निजीकरण गर्दा उपयुक्त हुन्छ । 

समाजमा वस्तु र सेवाहरूको वितरणका लागि चाहिने र निजीकरण गर्न नमिल्ने संस्थानहरू जस्तै नेपाल आयल निगम, नेपाल विद्युत् प्राधिकरण आदिलाई हेर्ने दृष्टिकोण र निजीक्षेत्र सहभागी संस्थानहरू जस्तै हेटौंडा सिमेन्ट, नेशनल टे«डिङ लिमिटेड जस्ता संस्थानलाई हेर्ने दृष्टिकोणमा फरकपन ल्याउन जरुरी छ । पहिलो वर्गका संस्थानहरूमा प्रतिस्पर्धी वातावरण बनाई कार्य सम्पादनमा सुधार ल्याउन जरुरी छ भने दास्रो वर्गका संस्थानहरूलाई निजीकरण तर्फ लैजान जरुरी छ । 

संस्थागत संरचना
सार्वजनिक संस्थानहरूको संरचना हेर्दा संस्थानहरू बोझिलो रहेको अनुभव हुन्छ । कर्मचारी संख्या, कर्मचारी खर्च र मुनाफालाई तुलनात्मक रूपमा अध्ययन गर्दा सो तथ्य उजागर हुन्छ । अत्यधिक कर्मचारीका कारण संरचना भद्दा भई कर्मचारी खर्च बढेको छ । यसले मुनाफामा नकारात्मक असर गर्छ । आव २०७४/७५ मा सरकारी स्वामित्वको तीन बैंकको जम्मा कर्मचारी संख्या ६ हजार ४९९ रहेको देखिन्छ । यो भनेको समग्र वाणिज्य बैंकहरूको कुल कर्मचारीको २० प्रतिशत हो । तर, कुल कर्जा प्रवाहमा यी बैंकहरूको योगदान जम्मा १४ प्रतिशत मात्र रहेको छ । यसैगरी २०७५/७६ मा पूर्ण सरकारी स्वामित्वको राष्ट्रिय वाणिज्य बैंकको कर्मचारी संख्या १९७३ रहेको देखिन्छ । उसले रू. ५ अर्ब ४२ करोड मुनाफा गरेको छ । सोही अवधिमा मुनाफामा दोस्रो रहेको नबिल बैंकले १०८५ कर्मचारीका साथ रू. ४ अर्ब २२ करोड मुनाफा आर्जन गरेको देखिन्छ । यसरी यी दुई संस्थाको प्रतिकर्मचारी मुनाफामा निजीक्षेत्रको नबिल बैंक करीब १२ लाखले अघि छ । यसरी तथ्यांकले सार्वजनिक संस्थानहरूमा कर्मचारीहरूको उत्पादकत्व कम रहको यथार्थलाई उजागर गर्छ । सो तथ्य अरू सार्वजनिक संस्थानको हकमा अझ भयावह रहेकोे अनुमान गर्न सकिन्छ । 

संस्थानहरूलाई आवश्यक पर्ने कर्मचारीहरू प्रतिस्पर्र्धाका आधारमा छनोट गर्ने, कर्मचारीहरूलाई उच्च नतीजाका लागि कार्य सम्पादन सम्झौता गरी स्वतन्त्र निकायबाट कार्यसम्पादन मूल्यांकनको व्यवस्था गर्ने प्रणालीको सृजना गरे हालको अवस्थामा सुधार आउन सक्छ । संस्थानहरूको संगाठनिक संरचनामा सुधार ल्याई र प्रविधिमैत्री प्रणलीका माध्यमबाट रिपोर्टिङ व्यवस्था मिलाउन जरुरी छ । 

सार्वजनिक संस्थानहरूको सञ्चालनका लागि ठूलो सुधार आवश्यक छ । उच्च व्यवस्थापनका लागि करारनामा गर्नु, कर्मचारी भर्नामा पारदर्शिता कायम गर्न लोकसेवा आयोगका माध्यमबाट काम गर्नु, कर्मचारीहरूलाई बा≈य हस्तक्षेपबाट मुक्त गर्ने प्रयास गर्नु, संस्थानहरूले सुधार गर्न नसकेको अवस्थामा सरकारी अनुदानमा रोक लगाउनु आदि सरकारी तहबाट सुधारका प्रयास भएका छन् । संस्थानहरूको सुधारको प्रयासलाई कायम गर्दै संस्थानहरूलाई निजीकरण गर्ने, प्रतिस्पर्धी बनाउन पहल गर्ने, व्यावसायिक सिद्धान्तका आधारमा कार्य गर्न प्रेरित गर्ने, संस्थागत तथा नीतिगत सुधारको थप व्यवस्था गर्ने आदि जस्ता विषयमा वर्तमान सरकारले दीर्घकालीन सोच राखी काम गर्न जरुरी छ । 

लेखक नेपाल राष्ट्र बैंकमा कार्यरत छन् । 

 Published in Arthik Abhiyan National Daily on Sep 12, 2019.

Positive Outlook for Digital Banking in Nepal

Positive Outlook for Digital Banking in Nepal

                                                                                                                        *Amish Dhungel        

The term bank is said to have been derived from the Italian word “banca”, meaning a bench, used by Italian merchants to make a deal to borrow and lend money. As such it is evident that the meaning of the bank has a connotation with the physical location/evidence. Making use of banking services meant that a customer should be present in the physical outlet of a bank to perform transactions. However, with the introduction of modern technology in the banking industry, the traditional notion of banking is changing. Customers can now avail banking services Any-Time, Any-Where without having to reach the physical branch location.

As Bill Gates announced in 2008, “banking is essential, banks are not”, the developments in the field of banking shows such directions. The use of computer and internet technology for offering banking services has changed the way traditional banking is done. And with digital banking/finance services offered via means of telephone, mobile phone, internet, etc. is popular the modus-operandi of banking evolving.

Nepalese banks and financial institutions followed the global band-wagon of introducing modern technology in the banking industry. It was as early as 1990 that Nepalese banks started to adopt means of digital banking. Then Nepal Arab Bank Limited introduced Credit Cards in 1990 AD. This was followed by Himalayan Bank Ltd by offering Tele-banking, Internet banking by Kumari Bank Limited in 2002, SMS banking by Laxmi Bank Limited in 2004 and so on.

The mediums of digital banking prevalent in Nepal are cards, internet banking, mobile banking, e-wallets(offered by non-bank institutions), Point of Sales (POS) machines, Point of Transactions (POT) machines, QR(Quick Response) Code, ATM (Automated Teller Machine), etc. Similarly Electronic Cheque Clearance (ECC), Interbank Payment System (IPS), SWIFT (Society for Worldwide Interbank Financial Telecommunication), etc are digital banking tools that have been used for executing transactions of large volumes.

Though it has been quite some time that Nepal has been using various modern means of payments, the volume of such usage hasn’t increased in a significant manner. In spite of the slow pace, the numbers are increasing. The following table shows an increase in the usage of various channels of digital banking in Nepal for two consecutive years.

Tools	2nd Quarter 74/75	2nd Quarter 75/76
No. of Mobile Banking Customers	35,30,227	63,94,916
No. of Internet Banking Customers	8,42,431	8,56,695
No. of ATMs	2,638	3,049
No. of Debit Cards	57,69,128	59,62,838
No. of Credit Cards	94,716	1,00,527

Source: Monthly Statistics, NRB

Popularity of digital banking services has been a global trend. Thanks to the ease in connection, low cost of product offerings, its role in ensuring financial inclusion, and poverty alleviation, etc. Increase in use of digital banking will reduce the demand of cash; meaning reduced expenses in printing cash, less circulation cost, higher durability, increased the transparency of transactions, higher revenue collection for government, etc. Having realized immense importance of digital banking, both Nepal Rastra Bank (NRB) and Government of Nepal (GoN) has felt the urge to promote Digital Banking in Nepal. Recent move by both, the body shows such direction.

To discourage cash is to promote digital banking. For this the central regulatory authority, NRB has established a Payment Systems Department on 2nd July 2015, in accordance with the spirit of NRB Act and entrusted the department with the sole authority of regulation, supervision and oversight of the entire payment systems(including digital ones) in the country, including the non-bank financial institutions. At present NRB has been providing a license to both banks and non-banking financial institution as Payment Service Provider (PSP) and Payment Systems Operator (PSO). As of Mid May 2019, the department has issued a license to 5 non-bank PSP’s and 4 non-bank PSO’s. It has also provided the license to 45 BFI’s to offer digital financial services. The number of market players is likely increasing in the day to come.

NRB has been working thoughtfully to develop a secure, healthy and efficient system of payments. It has formulated and implemented a National Payment System Development Strategy, Licensing policy for Payment Related Institutions 2073, Payment Systems Oversight Framework 2018, Payment and Settlement Bylaws 2072, and has also issued various directives and circulars to guide and direct payment systems related activities in Nepal. Recently it has made an upward revision of limit for digital transactions which addressed one of the suggestions by Digital Nepal Framework 2018 developed by Ministry of Communication and Information Technology aims to harness the benefit of technology to accelerate economic growth.  

NRB aims to move towards cash-less economy gradually by passing through less-cash economy. To discourage the use of cash NRB has reduced the limit of cash-based transactions to NPR 1 million from the erstwhile limit of NPR 3 million. This has lead to an increase in the volume of electronic transactions via NRB promoted Nepal Clearing House Limited (NCHL). For eg in 17/18 the average daily transaction volume and average settlement values in NCHL-IPS were 8,003 and NPR 3.03 Billion as against 2,413 and NPR 1.29 Billion in the previous year.

Similarly NRB is about to add a milestone to the Nepalese payment systems domain by installing the Real Time Gross Settlement (RTGS) system within September 2019. The system will cater to the need for urgent payments, large-value payments, securities-related payments, and government transactions. This will add to the credibility and efficiency of the existing payment systems. Upcoming endeavors of NRB include study for establishing National Payment Switch. The switch will increase the usage of digital financial services by reducing hassle and the cost of using digital finance. Similarly, the bank has entered into a cooperation with The World Bank to formulate a National Retail Payment Strategy. All these initiatives will develop a strong infrastructure to promote digital banking in the country.

Likewise GoN has also formulated Digital Nepal Framework 2018. The framework plans to promote Digital Finance Services to attain the aim of Digital Nepal. Similarly Budget 2076/77 presented recently has also put forth various creative ideas to promote digital transactions in Nepal. One of its interesting announcements is to rebate back the customer with 10% of 13% Value Added Tax that is paid during the online purchase of goods and services. It also prioritizes the use of electronic cards for fare payments in the transport industry. Similarly, it has also announced for collection of government revenue and payment of expenditure through the electronic system from next year. The budget has also provided to popularize mobile, internet and branch-less banking, establish National Payment Gateway, decrease cash-based transactions by use of secured cards and internet payment options, ensure a mechanism for payment of electricity and drinking water bills via an electronic medium, etc. All these initiatives if implemented properly will increase digital transactions and digital banking in manifold times.

The overall ambiance is optimistic for popularizing digital banking in Nepal. With mobile penetration rate greater than 100% out of which  more than 70% of mobile phones being smart, declining cost per unit of data, high-speed internet solutions and 63% of internet penetration rate, expansion of physical infrastructure, etc the environment is more encouraging for the establishment of a conducive ecosystem of digital banking. Government of Nepal and Nepal Rastra Bank have also issued promising plans and policies to promote digital banking in the country. A coordinated approach with various stakeholders should be ensured to achieve intended results of thoughtfully formulated policies.

*Dhungel is Assistant Director in Nepal Rastra Bank.

This article was published by Nepal Financial Institutions Employees Association  in Arthik Mimansha, on October, 2019. 

लघुवित्तमा विद्यमान समस्या: मर्जरबाट समाधान निस्कला ?

  लघुवित्तमा विद्यमान समस्या:  मर्जरबाट समाधान निस्कला ?

Sep 12, 2019 

लेख | दृष्टिकोण

 

सन् १९९० को दशकमा उदार अर्थतन्त्रको उदयसँगै नेपालमा वित्तीय संस्थाहरूको स्थापनाका लागि इजाजत प्रक्रिया सरलीकरण भयो । वित्तीय सेवाको पहुँच विस्तार मार्फत मुलुकका ग्रामीण क्षेत्रमा बसोवास गर्ने आर्थिक तथा सामाजिक रूपले पिछडिएका जनसमुदायका लागि रोजगारी सृजना र आय वृद्वि आदि मार्फत जीवनस्तर सुधारमा बंगालादेशका लघुवित्त संस्थाहरूले उल्लेख्य योगदान पुर्‍याएकोे मोडल अनुसरण गर्दै ग्रामीण विकास बैंकहरूको स्थापना गरी नेपालमा लघुवित्त क्षेत्रको स्थापना गरेको पाइन्छ । 

लघुवित्त वित्तीय संस्थाहरू २०७५ चैत मसान्तसम्म मुुलुुकका ७७ जिल्लामा ८९ संस्थाका ३ हजार ४१२ शाखाबाट लघुवित्त वित्तीय संस्थाको सेवा पुगिसकेको छ । लघुवित्त सेवाप्रदायकहरूको कुल सम्पत्ति/दायित्व २०७५ चैत मसान्तसम्ममा रू. २ खर्ब ५४ अर्ब पुगेको छ । त्यसै गरी कुल कर्जा तथा सापट रू. २ खर्ब १७ अर्ब पुगेको छ । 

यी मध्ये कतिपय संस्था वाणिज्य बैंकजस्तै सक्षम छन् भने कतिपय संस्थामा स्थायित्व सकंट समेत देखिएको छ । लघुवित्त वित्तीय संस्थाहरूको संख्या बढ्दै गएको परिप्रेक्ष्यमा विविध प्रगतिका हुँदाहुँदै पनि आज लघुवित्त क्षेत्रमा उल्लेख्य समस्या रहेका छन् ।

सेवा विस्तार 
लघुवित्तको सेवा विस्तार सकारात्मक नै भए पनि सोचे अनुरूप भएको छैन । सेवा विस्तारका लागि विविध अड्चनमध्ये मुलुकको भौगोलिक विकटताका प्रमुख हो । पहाडी र हिमाली क्षेत्रले देशको ८३ प्रतिशत भूभाग ओगटेकोमा सो क्षेत्रका अधिकांश भूभागमा अझै पनि सडक, बिजुली, यातायात, सञ्चार, सुरक्षा जस्ता वित्तीय सेवा विस्तारका लागि अत्यावश्यक पूर्वाधार दयनीय अवस्थामा छन् । 

साथै, ग्रामीण जनतामा वित्तीय साक्षरताको स्तर कमजोर भएकाले कर्जा प्राप्त गर्ने र त्यसलाई परिचालन तथा सदुपयोग गर्ने क्षमता कमजोर छ । यीबाहेक कमजोर सुरक्षाका कारण विकट क्षेत्रमा सेवा पुर्‍याउन गाह्रो भएको छ । 

कर्जा दोहरोपन 
लघुवित्त संस्थाहरूका लागि कर्जा सूचना प्रदान गर्ने संयन्त्रको अभावका कारण एकै व्यक्तिले विभिन्न संस्थावाट कर्जा लिई कर्जा नतिर्ने तथा संस्थाको सम्पत्ति दुरुपयोग गर्ने घटनाहरू असंख्य मात्रामा आइरहेका छन् । उच्च मुनाफाबाट प्रेरित भएर अस्वस्थ्य प्रतिस्पर्धाका कारण फरकफरक संस्थाले एउटै ऋणीलाई कर्जा प्रवाह गर्ने होडबाजीले दोहोरोपना बढ्दै गएको छ । आर्थिक वर्ष (आव) २०७६/७७ को बजेट वक्तव्यले लघुवित्तको कारोबारलाई कर्जा सूचना केन्द्रको दायरामा ल्याउने व्यवस्था गरेको र त्यसको प्रभावकारी कार्यान्वयन हुन बाँकी रहेको देखिन्छ । 

उच्च ब्याजदर 
पूँजीको लागत बढी हुने कारणले लघुवित्त संस्थाले कर्जामा लिने ब्याजदर पनि बढी हुने गरेका छ । यस अतिरिक्त ग्रामीण घरदैलोमा नै ग्राहकलाई वित्तीय सेवा प्रदान गर्नैपर्ने, कर्जा लिने ग्राहकलाई तालीम, शीप आदि दिनुपर्ने कारणले कर्जाको ब्याज बढी हुँदै जान्छ । 

वित्तीय स्रोतका लागि बैंकिङ क्षेत्रसँग भर पर्नुपर्ने भएकाले पनि कोषको लागत उच्च भएको देखिन्छ । हाल लघुवित्त वित्तीय संस्थाहरूले १८ प्रतिशत हाराहारीमा कर्जा उपलब्ध गराइरहेका छन् । वाणिज्य बैंकहरूबाट १२ देखि १४ प्रतिशतसम्म कर्जा लिएर लगानी गर्दा ४ प्रतिशत मार्जिन मात्र राख्दा पनि सो ब्याजदर पुग्छ । 

एकातिर ब्याजदर उच्च छ भने अर्कातिर संस्थाको मुनाफा अस्वाभाविक भएकाले ब्याजदर नै अस्वाभाविक हो कि भन्ने विवाद छ । यसर्थ स्रोतको उचित व्यवस्थापन गर्दै लघुवित्त वित्तीय संस्थाको ब्याजदरलाई एक वाञ्छित सीमाभित्र राख्न जरुरी छ । यसो गर्दा हामीले लघुवित्तका माध्यमबाट चाहेको जीवनस्तर वृद्घि र गरीबी न्यूनीकरणमा परिणाममुखी उपलब्धि प्राप्त गर्न सक्ने अवस्था सृजना हुन्छ । 

स्रोत संकलनको दायरा 
सर्वसाधारणबाट बचत संकलन गर्न हाल दुई संस्थाले मात्र अनुमति पाएका छन् । लघुिवत्त संस्थाहरूले आफ्नै सदस्यबाहेक सर्वसाधारणबाट बचत लिन सक्दैनन् । स्रोत अभावको पूर्तिका लागि सर्वसाधारणबाट बचत संकलन गर्न पाउनुपर्ने माग निकै लामो समयदेखि रहिरहेको छ । 

अहिले सर्वसाधारणबाट बचत स्वीकार गर्ने लघुवित्त संथाले कुल बचतको २ प्रतिशत रकम र सर्वसाधारणबाट बचत स्वीकार नगर्ने लघुवित्त संस्थाले शून्य दशमलव ५ प्रतिशत रकम अनिवार्य नगद मौज्दात राख्नुपर्ने प्रावधान छ । लघुवित्त संस्थालाई सर्वसाधारणको बचत संकलन गर्न दिँदा नेपाल राष्ट्र बैंकको प्रावधान अनुसार विना ब्याज रकम राख्नुपर्ने सीमा बढ्नेछ ।  

साथै, पछिल्लो चरणमा आएर बैंक तथा वित्तीय संस्थाहरूले आफ्नै सहायक कम्पनीका रूपमा लघुवित्त संस्थाको स्थापना गरेका छन् । यसले गर्दा स्रोत अभावको समस्या भएको र यसबाट लघुवित्त संस्थालाई विपन्न वर्ग अन्तर्गत जाने कर्जाको स्रोत साँघुरिने देखिन्छ किनकि आफ्नै संस्थालाई कर्जा प्रवाह गरेर स्रोतको सुनिश्चितता गर्नुपर्ने हुन्छ । 

संस्थागत सुशासन
अधिकांश लघुवित्त संस्थाहरू संस्थागत सुशासनको विषयमा कमजोर देखिएका छन् । संस्थाको सञ्चालक समितिमा योग्य व्यक्तिको चयन हुन नसक्नु, उपलब्ध व्यक्तिहरूमा बैंक तथा वित्तीय संस्थाका बारेमा यथेष्ट जानकारी नहुनु, संस्थाका स्रोतसाधनलाई व्यक्तिगत कार्यमा प्रयोग गर्नु, उच्च मुनाफाद्वारा उत्प्रेरित भई कर्मचारीहरूलाई व्यवसाय विस्तारका लागि अनुचित दबाब दिनु, कर्मचारीहरूको वृत्ति विकास, सरुवा, बढुवामा विधिसम्मत रूपमा काम नगर्नु आदि समस्या छन् । 

यसैगरी कर्मचारीहरूको हकमा क्षमतावान् कर्मचारीहरूको अभाव रहनु, बैंकको रकम अपचलन गर्ने, पद तथा संस्थाको सम्पत्तिको दुरुपयोग गर्ने, कर्जा सीमाभन्दा बढी कर्जा प्रवाह गर्ने, आवश्यक प्रक्रिया पूरा नगरी लापरबाहीपूर्ण तरीकाले कर्जा लगानी तथा असुली गर्नेे आदि क्रियाकलापलेसंस्थागत सुशासन कमजोर हुँदै गएको छ ।

मर्जर तथा प्राप्ति 
बैंक तथा वित्तीय संस्था स्थापनालाई प्रतिष्ठासँग जोड्ने चलनले लघुवित्त नै भए पनि स्थापना गरौं न भन्ने सोचाइका कारण लघुिवत्त संस्थाको संख्या बढेको हो । ‘पानी धेरै परेपछि खोला धेरै धमिलो हुन्छ’ भनेझैं लघुिवत्त क्षेत्रमा पनि संख्यात्मक वृद्धिका कारण उल्लेख्य समस्या आइरहेका छन् ।

चुक्ता पूँजी पुर्‍याउन नसक्नु, स्रोतको अभावमा कर्जा लगानी गर्न नसक्नु, गुणस्तरीय जनशक्तिको अभाव तथा भएका कर्मचारीको उचित व्यवस्थापन गर्न नसक्नु, कर्मचारी खर्चमा वृद्धि, नियमनकारी निकायको नीतिगत परिधिभित्र बस्न नसक्नु, संस्थागत खर्चमा मितव्ययी हुन नसक्नु, सूचनाप्रविधिमा उच्च खर्च आदि कारणले लघुवित्त क्षेत्रमा अझ अप्ठ्यारो दिन नआउला भन्न सकिँदैन । साथै लघुिवत्तहरूले विना धितो कर्जा प्रवाह गर्ने भएकाले सो कर्जासँग सम्बद्ध भएर आउने जोखिम उच्च हुन्छ । त्यसैले यस्तो कर्जा जोखिमका कारण थोरै चुक्ता पूँजी हुने संस्थाहरूलाई गाह्रो अवस्था आउन सक्छ । 

अतः लघुिवत्तको क्षेत्रमा मर्जरको अझ ठूलो सान्दर्भिकता छ । यसका लागि नेपाली अर्थतन्त्रले धान्ने आकारमा ल्याउने गरी नेपाल राष्ट्र बैंकले केही वर्षयता बैंक तथा वित्तीय संस्थाहरूको मर्जर सम्बन्धी नीति अंगीकार गरेको । मौद्रिक नीतिले समेत साबिकका सहुलियतमा थप छूटको व्यवस्था गरी सो नीति जारी राखेको छ । सहुलियतको आधारमा संख्या नघटेमा आगामी दिनमा नेपाल राष्ट्र बैंकले बाध्यात्मकारी मर्जर नीति नल्याउला भन्न सकिँदैन ।

उच्च आर्थिक वृद्धितर्फ अग्रसर भइरहेको हाम्रो अर्थतन्त्रको वृद्धिदरलाई स्थायित्व प्रदान गर्न लघुवित्त क्षेत्रको ठूलो भूमिका छ । रोजगारी वृद्धि, गरीबी निवारण, आय आर्जनमा वृद्धि, महिला सशक्तीकरण, साक्षरता वृद्धि, सामाजिक चेतना वृद्धि, आदिद्वारा सामाजिक, आर्थिक रूपान्तरणमा लघुवित्त क्षेत्रको उल्लेखनीय भूमिका हुने कुरामा द्विविधा नहोला । यसर्थ माथि उठेका मुद्दाहरूको आवश्यक सुनुवाइका निमित्त सरोकारवालाहरूको सक्रिय सहभागिताबाट प्रयास गर्न नितान्त जरुरी छ । लघुवित्त क्षेत्रलाई स्वच्छ, स्वस्थ, व्यवस्थित र मर्यादित बनाउन सरकार तथा नियमनकारी निकाय, लघुवित्त संस्थाहरू, सम्पूर्ण लघुवित्तकर्मी र सरोकारवालाहरूले उचित ध्यान दिनुपर्छ ।

लेखक नेपाल राष्ट्र बैंकका सहायक निर्देशक हुन् ।

 Published in Arthik Abhiyan National Daily on Sep 12, 2019.

Positive Outlook of the Monetary Policy 2076/77

It is obvious for the stakeholders to have an interest in the to-be introduced the monetary policy.   Besides the rumors about "Big Mergers" and "Forced Merger" increased curiosity regarding the policy. Amidst all the rumors and curiosity, the much-awaited Monetary Policy of 2019/20 was released on July 22, 2019.

Recently presented Monetary policy aims to capitalize on the achievement to date and also aims to address the emerging concerns prevalent in the contemporary banking and financial sector of the country. 

In contrast to widely popular belief that monetary policy would proactively propagate the notion of forced merger/acquisition, the central bank has proposed an amicable offer to promote the merger and acquisition of the banks and financial institutions(BFIs).

Generally, the monetary policy aims to achieve three major objectives: control inflation, maintain fiscal stability, and assist the growth target of the government envisioned by the fiscal policy. In this connection, the monetary policy 2019/20 aims to move in the same direction. It has adopted a balanced approach and seems promising. The analysis has been presented under the following four headings.

1.    Interest Rate Stability

The appropriate rate of Interest has always been a topic of discussion and debate. The suppliers of funds expect to get an adequate return on their hard-earned money. Whereas the users of the funds like industrialists and businessmen always claim the interest rate to be exorbitant. Though the determination of interest rate is not within the sole control of the Central bank, it can devise policy measures to ensure the stability of the interest rate. The Central bank seems to be moving towards the attainment of the interest rate stability.  For eg, the data of the last three year shows such direction.

Interest rate(Weighted Average)	2073 Ashad	2074 Ashad	2075 Ashad
Deposit	3.3	6.20	6.50
Loan	8.9	11.30	12.50
Average Base Rate	6.50	9.90	10.47

Ability to stabilize the rate of interest will benefit both the depositors and the borrowers. Similarly decreasing the spread rate to 4.4%(from the existing rate of 4.5%) in accordance with Financial Sector Development Strategy, decreasing the Lender of Last Resort(LOLR) rate to 6% from the existing 6.5%, etc indicate the measures by the central bank to ensure that the interest rate will remain within the acceptable limit. Likewise raising 25% of the bank's paid-up capital as debentures will enhance the capacity of the BFIs to invest for a longer period while ensuring the stability of the interest rate.  The policy has also made a downward revision of the refinance rate and has barred the BFIs to charge more than 2% to the base rate for the SME loans, it has also allowed the BFIs to accept Deposits from foreign corporate and Non-Resident Nepalese for a minimum period of two years. With the above-mentioned measures, the central bank has made ample effort to ensure stability of the interest rate while also expanding the banking instruments.

2.  Financial Consolidation

The policy has encouraged willful mergers and acquisitions of BFIs. For a bank entering into merger/acquisition, various facilities have been offered such as; extended time limit up to 2078 Ashad to meet sectoral lending in agriculture, energy, and tourism sector and to maintain spread rate of 4.4%, such banks do not have to take permission from Nepal Rastra Bank to open branches, and waiver of cooling period provision for the Chief Executive Officer and the Board of Directors. Similarly, it has also announced privilege for the Microfinance financial institutions entering into merger/acquisition. Similarly, the policy also puts light on the need for merger/acquisition of institutions with cross-holdings, regulation, and supervisions of Systematically Important Banks (SIBs), etc. All these measures will strengthen the capacity of BFIs to absorb risk, enhance lending capacity, cut duplicating costs, etc. 

3.   Financial Inclusion and Consumer Protection

The policy is step-forward to escalate the level of financial inclusion in the country. In line with the objective of ensuring broader financial inclusion, the policy has aimed towards establishing banking channels to all 6743 ward of 753 local levels. BFIs now can open Branches less banking agents without the approval of the central bank. This initiative is more likely to bring a huge volume of unbanked/underbanked population within the banking network.

Similarly, BFIs now need to develop an audio notice board to transmit the information about their service offerings to the public without transferring any cost to the customers. They also need to develop their website in Nepalese languages. Most importantly the policy has decided to establish the Financial Consumer Protection Unit to address the grievance of both the depositors and the borrowers.  All these measures will improve the situation of financial inclusion and consumer protection in the country.

4.   Supporting growth initiative of Government

With the enforcement of the Federal Constitution of Nepal 2015, the country has entered into a phase of political stability. The present government has a strong mandate for 5 years of which significant time period is left. In such a situation, the executive can steer the economy in a strong growth trajectory.

To create the climate conducive to growth the policy is directed towards containing the inflation rate to 6 % while taking into account the growth objective of 8.5%. It has aimed to increase the sources of deposits for the BFIs and also aimed to decrease the lending rate. 

The demand for credit has been increasing, and time and again banks have been facing loanable funds scarcity. In such a situation, the goal should be to increase the sources of the fund while also to decrease the rate of interest. The policy has adopted flexibility regarding the sources of the funds from abroad, eg: deposits from Pension funds, hedge funds, etc can also be brought, issues of debenture of at least 25% of the paid-up capital of BFIs, etc.  Measures to decrease interest rates are: decreasing the LOLR to 6% from erstwhile rate of 6.5%, a downward revision of the interest rate of general refinance and special refinance facility, decreasing the spread from 4.5% to 4.4%, etc. Similarly, the policy has continued earlier provisions relating to priority sector lending and deprived sector lending, ensure the effectiveness of the refinance via a refinance policy, etc. All these measures will generate adequate resources to support the growth target of the government.

Conclusion

Nepal has a robust banking and financial industry. The increase in the presence of BFIs at the local level has largely increased financial access and inclusion. However, the concerns of interest rate fluctuations, credit allocation, customer grievances, the effectiveness of refinancing, etc have been a topic of debate. The monetary policy aims to address all these issues and thus enhance the stability of the banking and financial system, while also enhancing the trust of the general public in overall banking. As such monetary policy is forward-looking and optimistic.