NRB looks options for NBL and RBB

KATHMANDU, Aug 11: Nepal Rastra Bank has floated a number of options, with ultimate goal of privatization, to deal with chronic financial problems of two state-owned banks -- Nepal Bank Limited (NBL) and Rastriya Banijya Bank (RBB).
The three options, which were presented at a meeting of high-level committee for financial and economic reforms chaired by Finance Minister Surendra Pandey on Tuesday, has proposed to divest the equities of NBL and RBB, owned by the government, to private parties through a competitive bidding process, albeit gradually.
"This will slowly lay ground to lower the ownership of the government on the banks, thus ultimately helping to completely divest state ownership in the long-run," said an official, who was present in the meeting.
However, shareholders will have to inject additional investments to eliminate existing negative net worth of both the banks. Though no detail discussions on the proposal was made, the proposal aims to eliminate existing negative net worth of the banks so that they can be sold in a competitive bidding, said the official.
Currently, NBL has a negative net worth of Rs 5.18 billion, whereas such negative net worth of RBB is Rs 14.6 billion, according to central bank statistics. If the plan is implemented, the government will have to invest around Rs 17 billion -- Rs 14.6 billion for RBB, since it is completely owned by the state and Rs 2 billion in the NBL where it owns 40 percent stake.
The government has to urgently find solutions for both banks since both of them have the negative primary capitals and financial and technical cooperation that they are receiving under Financial Sector Technical Assistance Project (FSTAP) which will end on December 2011, stated a paper presented at the meeting.
The $10.12 million FASTAP was initiated in August 2008 and was jointly financed by loan assistance worth $ 3.8 million from International Development Assistance of the World Bank and $6.34 million from Britain´s DFID.
The official also said the ministry had shown interest toward the proposal of gradual divesting state´s share in NBL and RBB by inviting a strategic investor. However, the problem with NBL is that potential strategic investor will like to have majority share, whereas the government has only 40 percent stake in the bank to sell, said the official.
Allowing the RBB to liquidate its equities at a number of profit making banks, like Nepal Investment Bank, will be a viable option to increase its capital base, the official said, adding, that the upcoming meeting will take a concrete decision on whole range of matters. - REPUBLICA

Banks, finance companies still not fully immune.

KATHMANDU: Domestic banks and financial institutions are not out of risk and are still vulnerable, opined Nepal Rastra Bank (NRB) governor Bijayanath Bhattarai."The central bank might add more disclosure requirements," he said talking to the newly elected committee of Society of Economic Journalists Nepal (Sejon) here today. Banks should be operated by prudent norms and should not merely wait for NRB directives, he opined adding that the capital base of banks should be sound. "Few but strong banks is the need of the hour rather than numerous and weak banks that have negative networth and poor Capital Adequacy Ratio (CAR)"
"If banks and financial institutions are not run according to prudent norms, the central bank will take action against them to safeguard depositors' money," Bhattarai, who joined the office after two years, said. "The central bank wil take punitive measures if they do not obey directives and reform themselves."
Since the money in banks and financial institutions is that of the depositors, they should be shielded. After the Nepal Development Bank (NDB) fiasco, the government has brought the deposite insurance programme. "Though there is no full-proof regulatory norm to save banks from failing, deposite insurance can save small depositors," Bhattarai said adding that the financial sector reform programme that has slowed down in the recvent years will also be expedited. - Himalayan News Service

Financial sector's contribution to growth nominal: NRB

KATHMANDU, Aug 10: Despite having an impressive expansion of financial institutions in Nepal in recent years, their contribution in accelerating growth and lowering poverty has been minimal, a study conducted by Nepal Rastra Bank (NRB) concludes. The study -- entitled Financial Sector Development and Economic Growth in Nepal: FY 1975 - FY 2007 -- has recommended the government to develop a financial sector master plan (FSMP) in view of medium and long term perspective, pointing to where the nation´s financial system should move so as to achieve broader national interests.
The soon-to-be-published report urges the government to review the existing linkage between financial sector and economic growth by reviewing current strategies and policies. "In order to enhance the efficiency and effectiveness of the financial markets, the government should seriously think on existing financial environment in terms of determining the measures that have direct linkages on economic activities," the report underlines. “A clear message that can be drawn from this result is the need to enhance tie between financial sector and economic growth by reviewing current strategies and policies.The report blames weak financial health, especially high Non-performing Assets (NPAs) of Nepal Bank Limited (NBL) and Rastriya Banijya Bank (RBB), country´s two largest banks in terms of deposits, for the country´s weak financial market. "The increasing share of NPAs, in general, indicates that the borrowers were not able to pay back the loan because of the losses in their respective business. The loss in the business having investment in productive sector would mean a marginal or even negative contribution to national output and hence to per-capita output," states the report.As a result of liberal banking policy that the government adopted after the financial crisis that hit the country in mid 80s, the total number of financial institutions in the country has recorded a dramatic surge to 236. Of the total financial institutions, 26 are commercial banks, while 61 development banks have acquired operating licenses from the NRB. Likewise, the central bank has granted permission to 78 finance companies and 13 micro-finance institutions for banking transactions.The empirical results suggest that the government should pay more attention to foster and get maximum benefit from foreign trade. “The economic liberalization in terms of increasing volume of trade showed both positive and significant impact on growth -- one percent increase in total trade to GDP ratio has a nearly 0.14 percent increase in per-capita growth," the report states.Similarly, the report further reveals that the negative impact of population growth has indicated the need to enhance quality of human resource and effectiveness of population control measures."The short term measure for this would be to effectively handle the population growth measures. But in long term, the government should find the way to enhance the quality of human resource and make the environment feasible to absorb them within the nation," the report states.
REPUBLICA

Reform necessary in financial sector: Bhattarai

KATHMANDU, Aug 9: Nepal Rastra Bank (NRB) governor Bijay Nath Bhattarai Sunday warned stringent action against the management of banks and financial institutions having weak financial performance. He also said the central bank would restrict such financial institutions to collect deposits and issue loans to those financial institutions if they failed to improve their financial health. Bhattarai also vowed to go ahead with strong measures to minimize the existing malpractices seen in the financial sector.Speaking at an interaction with the newly elected office-bearers of Society of Economic Journalists of Nepal (SEJON) here on Sunday, Bhattarai said he would reactivate the Financial Reform Committee to bring about reforms in the sector."We will recall Binod Atrayaya, director of Nepal Bank Limited (NBL), to the central bank, to end conflict of interest at the NBL," Bhattarai said.
REPUBLICA

NRB not to issue licenses for banks

KATHMANDU, Aug 5 - Nepal Rastra Bank has deferred licenses to open new banks and financial institutions for am indefinite period.
A NRB press release issued
on Tuesday stated that the central bank was going to review the
existing licensing policy and procedures.
"The NRB has postponed registering application for the establishment of new banks and financial institution until it receives the study report on licensing policy," said the statement
The central bank has however made it clear that it would entertain the application to open 'D' class micro-finance institution as subsidiary company of 'A,' 'B,' and 'C,' class financial institutions.
The monetary policy for fiscal year 2009/10 has provisioned that the banks and financial institutions can establish 'D' class financial institutions to provide credit to deprived sectors.
NRB has however clarified that it would go ahead with the licensing procedures if the applicant has already collected five percent of
paid up capital and published public notice regarding the establishment of new financial institution.
But, those who just applied will have to wait until the NRB takes further decision. "Such applicants can take back application fee and
the application will be cancelled," NRB said.
Kantipur Report

12.3 pc inflation in month ending mid-June: NRB

KATHMANDU, Aug 5 - Double-digit inflation continues to hit the general public with the price rise going up by as high as 12.3 percent in the 11th month of last fiscal year 2008/09.
The country has been witnessing double digit inflation since first month of last fiscal year. The government has also made controlling inflation as its one big priority.
According to the latest macro-economic situation made public by the Nepal Rastra Bank (NRB) on Tuesday, high inflation was mainly driven by rise in the prices of food and beverages group which witnessed price rise of 19 percent.
In food and beverage group, the price indices of sugar and sugar related products increased by a whopping rate of 62.3 percent in the review period last fiscal year compared to an increase of just 5.5 percent the previous year.
Vegetables and fruits also witnessed a price rise of 55.5 percent against the decline of 3.3 percent in the previous year. The prices of meat, fish and eggs as well as pulse group also went up by 29.8 percent and 27.7 percent respectively in the review period against the rise of 12.6 percent and 11.1 percent in the previous year.
Only the grains and cereal products witnessed relatively lower price rise of 6.6 percent during the review period as against the increase of 21.2 percent in the previous year, according to the central bank.
Kathmandu valley witnessed highest inflation of 14.5 percent in the review period followed by 11.5 percent both in Terai and hills.
On the other hand, despite world economic recession, the country's export grew by 15.4 percent in the review period last year in contrast to decline by 2.1 percent in the previous year.
The export to India rose by 8.5 percent whereas export to third countries went up by 28.8 percent in the review period last year.
The export to India had declined by 8.2 percent in the previous year. Nepal's export to third countries however had gone up by 12.3 percent.
The increase in the exports of readymade garments, textile, G.I pipe, catechu and shoe and sandals was largely responsible for export growth to India. The growth in the exports of pulses, pashmina, woolen carpets, handicrafts and herbs were mainly responsible for export growth to third countries.
The country also witnessed a surge in imports as well. The imports went up by 26.3 percent in the review period against the increase of 14.3 percent in the same period of previous year. The import growth from India witnessed relatively lower growth of 12.9 percent last year against 23.8 percent in the previous year.
Kantipur Report

5 finance institutions ready for merger

The merger of five financial institutions, which have been permitted by the Nepal Rastra Bank, has reached final stage.
Himchuli Development Bank of Pokhara, Mahalaxmi Finance of Birgunj, Butwal Finance of Butwal and Siddhartha Finance of Bhairahawa have been permitted to merge with each other.The financial institutions have applied for upgrade by presenting Rs 2.1 billion paid capital. All process for the merger has been completed and documents have been sent to NRB for final approval, said Himchuli Development Bank's chairman Sushil Raj Parajuli.
The details of all institutions have been received to issue rights shares for merger, he said. He said rights sharea will be issued soon and the merger process will complete by Dashain. Each of the institute will contribute Rs 420 million.
Kantipur report

Supreme Court show-cause on Govt.

KATHMANDU, July 29 - The Supreme Court on Tuesday issued show-cause notice to the government demanding legal clarification on its decision to replace Dipendra Bahadur Kshetry with Bijaya Nath Bhattarai as governor at Nepal Rastra Bank (NRB).
However, the notice--issued by a single bench of justice Ram Kumar Prasad Sah in response to Kshetry's writ filed on Monday--has not stayed the government decision as demanded. The apex court has also summoned Kshetry's advocates for a hearing on August 3.
The government had reinstated Bhattarai on Friday following his acquittal of corruption charges.
At Tuesday's hearing, Kshetry's advocates had pleaded that NRB Act 2002 does not have any provision for reinstatement of a retired governor and for sacking Kshetry before his tenure expires.
Kantipur Report

Liberal banking license policy in doubt - Governor Bhattarai

KATHMANDU, July 27: Reinstated governor of Nepal Rastra Bank (NRB) Bijaya Nath Bhattarai has hinted that the ongoing liberal banking license policy might be suspended until supervision and monitoring capacity of the central bank was not strengthened.

Addressing a program organized at the central bank to welcome him, the governor said he was committed towards accelerating long-stalled financial sector reform program, which lost its pace after the he was dismissed from the post on corruption charge.

"Tremendous growth has been seen in the financial sector. But it doesn´t match with the pace of growth seen in strengthening supervision capacity of the central bank. The present pace of expansion can slow down if the central bank´s supervision capacity is not strengthened," he told the gathering.



Bhattarai, who returned to the post after 745 days, said that the growth seen in the financial sector has been above the growth seen in real sense, resulting in the expansion of only player thereby fueling unhealthy competition. "Encouragement of merger and acquisition is one of the best ways to deal with the rapid expansion of financial institutions and the negative consequences that might emerge in days to come,” he added.

Expressing concern over growing concentration of financial institutions in urban areas, Bhattarai said that the central bank would bring polices that will encourage them to expand their banking services to rural areas.

He also stressed on the need to improve the financial health of troubled-banks -- Nepal Bank Limited and Rastriya Banijya Bank. “We need to take the reform process initiated in those banks, which cost billion of rupees, to a logical end,” he said.

Bhattarai also said the central bank was fighting against poverty by expanding micro-finance in the countryside. "Policies to promote potential export sectors of the country will also be introduced," he said.

Earlier, outgoing governor Deependra Bahadur Kshetry told reporters that he could not complete some of the jobs, which he had planned, due to his unexpected removal from the post.

“I am not satisfied with the process by which I have been removed. I will consult with legal experts to explore the possibilities of challenging the decision,” he said.

No full support to Monetary Policy!

Nepal Rastra Bank Governor Bijaya Nath Bhattarai on Sunday said he broadly supports the policy adopted by the new Monetary Policy. But Bhattarai made it clear that he was not happy with the decision to reintroduce Statutory Liquidity Rate (SLR). He said necessary changes would be made in the policy -- with due endorsement of the Board of Directors -- so that it best serves the national interest.
REPUBLICA

NRB Governor Again - Bijaya Nath Bhattarai

"I am back home," said reinstated Governor Bijaya Nath Bhattarai today, promising to continue the fight against the financial mafia. "The support of my colleagues was my moral strength," he said addressing Nepal Rastra Bank (NRB) employees, were waiting for him all day.

Right after taking charge, Bhattarai said monitoring and supervision capacity of the central bank have to be enhanced. "Mushrooming banks and financial institutions have not contributed to the real sector's growth," he said adding that the increase in number had encouraged unhealthy competition. He was also against urban-centric banks and financial institutions. "There are more opportunities in semi-rural areas," he said.

Bhattarai opined that the country needs a few but strong banks and financial institutions rather than many weak ones. "Merger and Acquisition (M&A) should be encouraged to make stronger banks," he added. Asked if the Monetary Policy announced by his predecessor could be changed, he said it is the central bank's policy, and it would not make any difference who brings it. "It is a team that works on it and change of governor will not have any impact on it," said Bhattarai.

"Whatever good work that my predecessor Kshetry did, I will continue," he assured. "Others like the liquidation of Nepal Development Bank (NDB) I need to look into. NDB should have improved when NRB declared it a problematic bank, but it did not improve and today it has been sent to the court for liquidation," Bhattarai added.

The continuation of financial sector reform programme, good governance, accountability, transparency, lowering the NPA of Rastriya Banijya Bank and Nepal Bank Ltd, shareholder access to information are some of challenges for NRB, according to him. On the occasion, the then NRB executive director Surendra Bahadur Pradhan said that it took them two years and 15 days to get justice. "The financial Mafiosi and conspiracy against the central bank and its honest employee has been defeated," he said advising NRB employees to keep their morale high.

An emotional Pradhan also thanked the media and NRB employees for supporting him and Bhattarai throughtout the cooked up case against them. The CIAA had filed a case at the Special Court against Bhattarai and Pradhan on June 29, 2007. The Special Court sent the case to the Supreme Court after it could not decide unanimously. The Supreme Court on July 15 acquitted them.

NRB announces monetary policy 2009/10

KATHMANDU, July 24: Nepal Rastra Bank announced the monetary policy for 2009/10 on Friday.
The summary of the monetary policy 2009/10 as distributed by NRB:

Macroeconomic Situation of 2008/09

1. The gross domestic product at producers´ prices is estimated to register a growth of 4.7 percent in 2008/09 compared to a growth of 5.3 percent in 2007/08.

2. The agriculture sector is estimated to grow by 2.2 percent in 2008/09 compared to a growth of 4.7 percent in the previous year. The performance of agriculture sector remained sluggish on account of a decline in wheat production by 14.5 percent and pulse production by 5.3 percent, among others. The unfavorable weather condition and flood in eastern part of Nepal contributed to the dismal agro-production in 2008/09.

3. The non-agriculture sector expanded by 4.8 percent in 2008/09 compared to a growth of 5.6 percent in the previous year. The long hours of load shedding, poor labor relations and supply disturbances were the major factors responsible for the sluggish performance of non-agriculture sector in 2008/09.

4. The y-o-y national urban consumer price inflation escalated to double digit figure 12.9 percent in mid-May 2009 compared to 9.2 percent during the corresponding period of the previous year. The annual average consumer price inflation is estimated to soar to 13.0 percent in 2008/09. Such inflation rate was 7.7 percent in 2007/08. The current high level of inflation rate is largely emerging from the supply side.

5. Although the trade deficit widened, the overall balance of payments (BOP) posted a surplus of Rs. 43.1 billion in the first ten months of 2008/09 compared to a surplus of Rs. 19.9 billion in the previous year.

6. The export sector exhibited a satisfactory performance in the first ten months of 2008/09 even in the face of global economic crisis. Total export grew by 19.8 percent in the first ten months of 2008/09 as against a decline of 2.4 percent in the previous year. The depreciation of the Nepali rupee vis-à-vis the US dollar contributed to the surge in export in 2008/09.

7. Total imports increased by 25.4 percent in 2008/09 compared to a growth of 16.8 percent in the previous year.

8. Workers´ remittances increased significantly by 55.5 percent to Rs. 169.2 billion in the first ten months of 2008/09 compared to a growth of 35.5 percent in the previous year.

9. The accumulation of gross foreign exchange reserves reached Rs. 283.4 billion in the first ten months of 2008/09. This level of reserves is sufficient to cover merchandise imports of 12.4 months and merchandise and services imports of 10.1 months.

10. Government revenue increased by 32.1 percent to Rs. 142.2 billion in 2008/09 compared to a growth of 22.7 percent in the previous year.

11. Government expenditure increased by 32.4 percent to Rs.213.6 billion in 2008/09 compared to a growth of 20.8 percent in the previous year. Of the total expenditure, recurrent expenditure grew by 33.5 percent to Rs. 122.1 billion while capital expenditure increased by 37.0 percent to Rs. 73.3 billion.

12. The government budget deficit expanded to Rs. 36.8 billion in 2008/09 from Rs. 33.4 billion in the previous year. In 2008/09, while the gross domestic financing of the budget deficit amounted to Rs. 18.4 billion, the external borrowing reached Rs. 10.4 billion.

Monetary Policy and Programs for 2009/10

13. The monetary policy stance of 2009/10 has been taken to be cautious and tight. The following analysis underpins the stance of monetary policy:

a. Nepal is facing a high inflationary pressure from the third quarter of 2007/08. Though the pressure is largely from the supply side, there is a need to be cautious to avert the fuelling of inflation from the monetary expansion. This entails a cautious and tight monetary policy stance.

b. Though prices for the tradable are influenced by the international prices, prices for non-tradable are determined through domestic demand and supply. So, there exists the potential to generate inflationary pressure for non-tradable through excessive growth in money supply. Hence, there is a need for monetary policy stance to be cautious in the present inflationary situation.

c. The excessive growth in money supply has also the potential to influence asset prices at least in the short run. The monetary policy for 2009/10 has taken a note of this.

d. The wider volatility in equity prices adversely affects the banking sector in particular and the economy as a whole in general. Excessive exposure of banks and financial institutions to the share market leads to a bubble.

When the bubble busts, the non-performing loans (NPLs) rises, leading to a stress in the banking sector. This fact has also been taken into account in choosing the stance of monetary policy for 2009/10.

e. In the face of deteriorating investment environment and the elevated level of remittances, there could be an increase in exposure of commercial banks and financial institutions to the real sector. This increase may lead to a surge of real estate prices. As the banks and financial institutions provide loans to real estate based on the market value of land and houses as collateral, a bubble in the real estate market directly affects the banking sector. Monetary policy stance for 2009/10 has taken this development in the real estate market driven by substantial flow of bank credit to this sector.

f. The negative real interest rate for a long period of time partly on account of a rise in inflation has also been a concern of monetary policy. Due to negative real interest rate, the allocation of financial resources has not been efficient. This development also underpins the stance of monetary policy for 2009/10.

14. Inflation rate at the global level is plummeting to single-digit level, while Nepal still faces the inflation at double-digit level, largely due to supply disturbances. Inflation is estimated to ease to a single-digit level with expected improvement in food and vegetable prices. Subject to no further adjustment in the petroleum prices and improvement in distributional channel, the annual average consumer price inflation is projected to moderate at 7.0 percent in 2009/10.

15. Like in the past, the international reserves sufficient to cover the merchandise and service imports for at least 6 months has been taken as the second primary objective of monetary policy of 2009/10 as well. In order to meet this target, a BOP surplus of Rs. 18.0 billion is projected for 2009/10.

16. The existing liquidity overhang in the economy is sufficient enough to facilitate the economic growth of 5.5 percent as mentioned in the budget speech for 2009/010. The growth rate of broad money is projected at 17.0 percent for 2009/10. It is estimated to grow by 21.0 percent in 2008/09. With a view to containing inflation at 7.0 percent, the growth in M2 is projected at a lower rate than that of the previous year.

17. The gross domestic credit of banking sector is projected to expand by 19.3 percent in 2009/10. Of the total domestic credit of banking sector, the credit to the private sector is projected to increase by 20.7 percent in 2009/10 compared to a growth of 24.2 percent in the previous year.

18. The NRB has a plan to prepare broad monetary survey by including development banks and finance companies into the coverage of monetary statistics framework. Likewise, the bank is planning to prepare monthly export-import price index (XMPI) within this year, which is believed to further assist trade related and macroeconomic analysis.
Monetary and Credit Measures

19. The range of counterparties (commercial banks, development banks and finance companies) for the conduct of monetary policy has been kept unchanged. The existing practice of undertaking the monetary operations only with counterparties will be continued and the short-term Standing Liquidity Facility (SLF) is entitled only to counterparties. In order to obtain these facilities, the counterparties should regularly submit their financial statements in formats stipulated in the NRB consolidated directives on a regular basis.

20. As and when required, monetary liquidity will be moderated through outright purchase auction, repo auction, outright sale auction and reverse repo auction as the main instruments of monetary policy.

21. The cash reserve ratio (CRR) has been kept unchanged at 5.5 percent. Likewise, the bank rate is kept unchanged at 6.5 percent.

22. Refinance rates have been kept unchanged as follows:

(a) The existing provision of refinance facility of Rs. 2 billion to sick industries and the refinance rate at 1.5 percent will be continued for 2009/10.

(b) The provision of refinance rate to the Rural Development Bank at 3.5 percent has been continued.

(c) Export credit refinance facility in domestic currency has been kept unchanged at 2.0 percent. Commercial banks are allowed not to charge more than 5.0 percent to the concerned borrower on such facility.

(d) Export credit refinance facility in foreign currency has been kept unchanged effective with extra surcharge of 25 basis points at the prevailing 6-month LIBOR rate.

(e) The existing provision of refinance facility to commercial banks and development banks against the collateral of credit provided to small and cottage industries at the refinance rate of 2.5 percent has been continued.

(f) The deprived sector credit requirement of 3 percent for commercial banks has been continued. The deprived secto6 (pr5(ctned)-e)9.6(pe3(e)4.7(nt)-2(r)4.6(pr81(6(ned).72240.002)9.6.)11.1d c)3.9(2(o)-18e)4.6(v)-1.1(evelg 6-m).6(v)p5.2(d)0.002t due Financial Sector Reform, Regulation and Supervision

25. The limit of minimum level of paid up capital has been kept unchanged. Now onwards, the base for increasing capital of licensed banks and financial institutions by the NRB will be their capital fund.

26. After the placement of the external management teams, there has been improvement in the financial health of Nepal Bank Limited and Rastriya Banijya Bank. They have started generating operational profit. However, there has not been a satisfactory recovery of non-performing loans of these banks as expected. Net worth in these banks is still negative. Therefore, the programs of upgrading the capital of these two banks to a stipulated level will be effectively implemented.

27. In order to extend the mobilization of financial resources, concepts on financial assets rescheduling and securitization will be prepared and, accordingly the draft of the Act will be submitted to the Government of Nepal (GON) in 2009/10. Likewise, a draft of the Act pertaining to terrorist financing will be submitted to the GON.

28. The ongoing actions against the willful defaulters will be strongly implemented for maintaining the financial sector stability.

29. Private sector will be encouraged to establish a credit rating agency and additional effective measures will be implemented so as to strengthen the credit information bureau.

30. As per the budget speech of 2009/010, a policy as well as institutional provision will be made in order to guarantee the deposits of small depositors up to Rs. 200,000.

31. In order to avert the excessive concentration of credit in a single sector, single obligor limit has been currently set at 50.0 percent, including 25.0 percent from fund based and remaining from non-fund based. This limit has been slashed to 25.0 percent of core capital including that of non-fund based effective from July 17, 2010.

32. In the context of the possibility of the establishment of foreign bank branches and offices in Nepal beginning 2010, the memorandum of understanding will be prepared for home-host supervisory relation within this year

33. The implementation of Early Warning Signal (EWS) to banks and financial institutions will be further strengthened so as to enhance the efficiency of off-site supervision. In the process, "Stress Testing" of commercial banks will be carried out.

34. Viewing the inadequacy of compliance-based supervision in the event of growing competition, evolving new instruments and products in the financial sector, a risk-based supervision will be implemented in a planned way in addition to compliance-based supervision.

35. The bank believes that implementation of the policies and programs envisaged in this monetary policy will contribute to the prudent macroeconomic management, the consolidation of financial and external sector and secured internal payments system, thereby creating a conducive economic environment necessary for high level of economic growth.

36. The NRB believes that the Government of Nepal, financial community, civil society and donor agencies will continue to assist it, as before, for the implementation of the monetary policy of 2009/10.

37. The bank wishes to thank all stakeholders for their cooperation in implementing the monetary policy of 2008/09.

38. The full text of the monetary policy of 2009/10 including the annual matrix of policies and programs, annexes and statistical tables are available at the NRB website: www.nrb.org.np.

NRB Announces Monetary Policy 2009/10

KATHMANDU, July 24: Nepal Rastra Bank announced the monetary policy for 2009/10 on Friday.