NRB’s role has always been conservative. these boomers doesn’t want to take slightest risk and they want is easy retirement bucks. I cannot even pin point what NRB has done till date to upgrade overall banking system/economy. The best outcome from their policy and this will remain as it is. I think it is only in Nepal where central bank is dictating how much dividend one should give. I don’t understand why NRB has to be so much protective on “reserve” “provisioning” when market has opened after lockdown. They could have done it a year before!

Lockdown was successful in brining interest rate down and it believe this is where we could have improved interest rate but it is back to high interest.

I’m more baffled by Nepalese banks. They are giving 9-10% pa in FD. It may increase deposit by some percentage, but how come they expect to see growth when overall economy is not growing and when there is still negative balance of payment/trade deficit. It seems their logic is, “people have money under their bed and it will come to bank when we increase interest”.

This increase in rate has surely caused panic in stock market. i know it is not bank’s job to make market green but 9-10%pa interest will increase loan interest as well. and we will be back to double digit interest. this will likely increase market price (mahangi) since most companies use debt money.

I don’t see market going up unless general saving interest is at around 7-7.5.

More at: r/NepalStock by captainright1

9 comments
  1. tip for panic sellers: The value of your asset (stocks) has declined and is worth less. The money doesn’t GO anywhere.

  2. – NRB actually done a lot of good work that benifits/improves the banking system/economy

    – Central Banks from other coutries do keep a cap on dividends, in america fed controls when banks can and cannot buy back their stock (stock buy backs are the prefered alternate to dividends)

    – Interst Rates are set based on the countrys Inflation, Inflation expectations, liquidity, etc its not that simple to just increase decrese rates based on simple things like you alluded to

    – Year on year We are actually in a trade surplus

    – With the amount of liquidity that came into the the market since 2020, M1 M2 higest it ever was i think inflation will remain higher and NRB will be forced to keep rates higher

    – Also the amount of Loan that has been taken in by private sector even in year on year basis is crazy (year on year would be higher becase no one was taking loans during lockdowns last year)

    With Loans interest being more expensive it will most likely cause the market to continue downwards Tara Nepal ho j ni hunna sakcha short term ma ta bagwan bharosa ho

    I think you are only jumping to conclusions. NRB is a serious institution people who work there are actually very well educated and serious about their work. NRBs only concern is to keep economy stable and running not what the stock market does.

    Read macroeconomic updates on NRB website, they also have many educational content on there too if you want to know more.

  3. You will see the positive side once relatively higher percentage of loan defauts in coming time. In case of microfinance there seems to be a ideological deffernce. They were targeted for a certain community meeting certain criteria. This year they might have profited due to higher spread rate and operating income but we cannot be indifferent to their growing rate and profitability. This sector needs to be highly regulated in terms of profitability given the socialist stance of the constitution. until and unless our rupees is pegged to the indian currency the interest rate, and we do not transform our economy there is not much to do from nrb. Please do correct me if I am wrong.

  4. Conservative, yes. But definitely not out of touch. Nrb has all kinds of detailed stats and info that they collect. They’re just choosing to be extremely conservative.

  5. As long as our NPR currency is pegged to the Indian Rupee, NRB is limited in its role in its monetary policy

  6. most of what you said makes sense but I don’t think NRB should take the slightest of risk. other commercial banks should take some risks if the want to but NRB will have to look after the general public’s interest

  7. there has always been a provision clause for BFIs based on their NPL. And about the dividends cap, its nothing of a worry. The more company has reserves, it is more better if you’re really into value investing. Bonus shares only overcapitalize a company. I am not a big fan of bonus shares personally either.

  8. Either increase interest rates or see your deposits go to other banks…its all about bringing deposits from one bank to another

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