NATIONAL 5 (Spotlight Weekly)]

NEPAL RASTRA BANK

On The Move

The central bank's decision to slash its refinance rate comes as a move to support the government's reform agenda

By A CORRESPONDENT

Governor Rawal : Pushing reform agenda

A full 18 days after the Reserve Bank of India slashed its bank rate (the rate of interest levied by the central bank on its lending to commercial banks) by one percentage point, Nepal followed the suit. "There is no direct links between the two," said Dr. Tilak Rawal, newly appointed Governor of Nepal Rastra Bank. "In fact, we the idea was being considered for the last several months."

Dr. Rawal announced last Tuesday that the central bank has decided to cut its refinance rate by 1.5 percent to be used for lending in priority sector by the commercial banks. "We have just sent the signals and await positive response to come," said the Governor. According to him, he expected lending rates to decline to some extent without witnessing similar decline on the interests upon deposits.

"The central bank's decision is a positive move," said Himalaya Shumsher Rana, former Governor of the NRB who is now serving as executive chairman of Himalayan Bank Limited, a leading joint venture bank. "As the interest rate of most of the commercial banks is already competitive, I don't see chances of lending rates by these banks coming down in near future," he added.

For the first time, the Bank has also opted for a differential bank rate by fixing lower refinance rate to the Rural Development Banks and other micro-credit institutions. The new bank rates to these two sectors have been fixed at 7.5 percent and 6.5 percent respectively down from earlier 9 percent. The central bank has also slashed the refinance rate for loans extended by the banking sector to exporters to 6.5 percent from existing 7 percent. "This is a positive development and will help boost country's exports," said Rajesh Kaji Shrestha, newly elected President of Nepal Chamber of Commerce.

The impact of the central bank's initiative remains to be seen.

NEPAL-EU TIES

New dimension

When British Foreign Secretary Robin Cook was meeting with Nepalese Foreign Minister Chakra Prasad Bastola at Shital Niwas, a delegation from European Parliament was discussing with Nepalese lawmakers on issues related to the governance, Bhutanese refugees and Maoists.

Nine member European parliamentary delegation led by Mr. Gerard Collins, Chairman of the Committee on Relations with South Asian Countries and SAARC, paid a courtesy call on His Majesty King Birendra Bir Bikram Shah Dev.

The delegation also called on Foreign Minister Bastola, Speaker of the House of Representatives Taranath Rana Bhat, National Assembly Chairman Dr. Mohammad Mohsin and members of House of Representatives Foreign Affairs and Human Rights Committee.

The visit of the European parliamentarians revolved around the issue of Bhutanese refugees. They also inspected Timai Refugee Camp in Eastern Nepal.

After inspecting the camp, Collins said that the issue of refugees will be presented to the European Parliament and European countries for finding out solution to the long-standing problem. The delegation also inspected a refugee identification center in Kakarbhitta.

Collins expressed deep concern about the future of refugees and especially the future of some 17,000 children who have been born in the refugee camp during the past 10 years. He said the European Parliament has given a top priority to just and speedy solution of the Bhutanese refugee problem.

The delegation, among others, pointed out the need to sort out the refugee problems through bilateral and multilateral efforts.

In their discussion with Nepalese parliamentarians, the European delegation also suggested to seek support from India to settle the Bhutanese refugees issue.