March 28: Bankers have urged the government for policy intervention to improve the economic indicators that have been worrying the economists.

They gave such suggestions during a meeting of the Finance Committee of the House of Representatives. The parliamentary panel had called the chief executive officers (CEOs) of commercial banks to take their feedback for the upcoming budget.

The CEOs who participated in the discussion said that the country's economic situation was deteriorating due to high Balance of Payments (BoP) and trade deficit as well as declining foreign exchange reserves and remittance inflows. They suggested that the government should take policy-level intervention to improve the situation.

Anil Keshari Shah, CEO of Nabil Bank, said that the inflow of remittances during lockdown was high but declined after the restrictions were lifted. He said that inflow of remittance and imports were inter-related and urged the government to intervene saying that even in the current complex situation, unnecessary items like betel nuts and cosmetics are being imported.

"When the dollar reserves can sustain imports of less than three months, the country is in a state of bankruptcy. We are in danger of reaching that point," he said. The time has come for you to stop. It is up to you to stop it,” said Shah.

According to a report prepared by Nepal Rastra Bank, the current account deficit is Rs 413.86 billion and the Balance of Payments is Rs 247.03 billion as of January. The total foreign exchange reserves, which stood at Rs 1399.03 billion in mid-July last year, have declined by 16.2 percent to Rs 1177.02 billion.

The foreign exchange reserves can sustain imports of goods for 7.4 months and 6.7 months when importing goods and services. The Department of Customs has made public the statistics that the country's trade deficit has exceeded Rs 1100 billion.

Sunil KC, CEO of NMB Bank, said that if remittances were the main source of bank deposits, increasing them would reduce the liquidity crunch in the banking sector. He said that the liquidity crisis can be lessened if the money in the government's reserve fund was mobilized. About Rs 300 billion has remained unused in the fund.

Ashoke Rana, CEO of Himalayan Bank, also complained that they had urged the government to provide the interest-free money deposited in state coffers to the banks but their demand was not addressed.

"We have repeatedly asked the Financial Comptroller General’s Office to allow the banks to keep the government’s funds as bank deposits," he said, adding, “If that happens, Rs 250 billion to Rs 300 billion will flow to the market.”

Rana said that remittances were affected due to the illegal ‘hundi’ system. He said that the traders were protesting against the recent move of NRB to control imports and investment in unproductive sector although it was the right decision. Policy intervention is needed at this time, he added.

Anupama Khunjeli, CEO of Mega Bank, suggested to effectively regulate the inflow of remittances and to deposit the dollars kept abroad by NRB in Nepali bank. She said that the current problems were also due to volatile interest rates, adding that the provision of monthly interest rate review should be removed and made quarterly.

Nepal Bankers Association CEO Anil Sharma said that the interest rate was volatile due to institutional deposits and the government's intervention was needed.