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NRB introduces monetary and institutional changes
KATHMANDU, DEC 18 - As per the conditions attached with Poverty Reduction Growth Facility (PRGF), an IMF-sponsored antipoverty plus financial sector reforms programme, Nepal Rastra Bank (NRB) has introduced monetary and organizational changes.
According to the latest changes, the central bank has revoked the maximum spread rate ceiling of one per cent between the buying and selling rates of foreign currencies effective from Wednesday.
Under a directive issued by the central bank in 1992, all the banks engaged in foreign currency exchange were required to maintain a maximum spread rate of one per cent between the buying and selling rates.
"Owing to tough competition between the commercial banks, the existing spread rate between the buying and selling rate was around 0.6 per cent, the directive had no meaning in practice," said a source of the central bank.
Among the 16 commercial banks permitted for foreign exchange dealings, semi government-owned Nepal Bank Limited currently has the least spread rate of 0.5 per cent.
The source also added that the new measures would have no impact on the foreign currency market and under the new arrangement, commercial banks are now free to fix the spread rate in foreign exchange dealings.
Similarly, the central bank has also scrapped its earlier directive for allowing maximum fluctuation of 0.5 per cent on declared lending rates of interest of a bank. "The measures were aimed at enhancing competition among the commercial banks," said the source.
Commercial banks had complained that the provision has barred them from a fair deal with the customers with clean and credible track record in the light of growing competition. "It will also help to boost the quality of credit and to adopt international banking practice," added the source.
Likewise, the central bank has also introduced a massive organizational change by creating four new divisions to make the functioning of the bank effective and compatible with world standard central banks.
The changes have been made under the Finance Sector Reform Programme supported mainly by the World Bank and the main objectives of the programme is to enhance regulation, monitoring and supervision capacity of the central bank.
Monetary and Foreign Exchange, Banking Operation, Support Services and Regulation and Supervision are the newly created four divisions and various other departments, depending upon their nature of work, have also been merged with the divisions.
Under the new arrangement, foreign exchange, research and government debt departments have been put under monetary and foreign exchange division, while department of mint and Kathmandu Banking Office will function under Banking Operation Division.
Similarly, Bank and Financial Institution Operation, Bank Supervision, Financial Institution Supervision and Micro-finance departments have been incorporated under Regulation and Supervision Division.
Likewise, General Service, Information-Technology, Finance Management, Manpower Management and Legal departments have been put under Support Service Division.Posted on: 2003-12-19 03:34
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