Right now, industrialists across the country are protesting against the bank. The protest against the bank started by the businessmen of Karnali province because the interest rate of the loan was high has spread all over the country. The industrialists started protesting saying that banks have raised the interest rate of loans up to 18 percent by keeping huge profits.
The industrialists of Morang and Sunsari and Bhaktapur have also supported the protest against the bank started by the Surkhet Industry and Commerce Association a month ago. Federation of Nepal Chamber of Commerce and Industry, Nepal Chamber of Commerce and the leadership of Nepal Industry Confederation have also supported the movement. Especially, the businessmen joined together in protest saying that the manufacturing industry will be in crisis due to the high interest rates. Laxman Kandel, President of Surkhet Industry and Commerce Association, who announced the protest against the bank, says that the protest will intensify after Tihar.
“We are the ones who started the agitation against the bank’s tyranny in Nepal, we have started the agitation since 1 month ago,” Kandel told Ratopati. On the call of the union, a ‘bank boycott’ campaign was also conducted in Surkhet market on 30th and 31st of October.
Kandel says that according to the call, all the businessmen have come together to agree not to keep money in the bank, not to withdraw money and not to pay loans and installments on October 30th and 31st. He said that the movement started from Surkhet will stop only after the current high interest rate is reduced.
Can the interest rate decrease?
Since October, the interest rate of loans taken by commercial banks has reached around 18 percent. Banks decided to increase the premium and service charges because of the increase in their expenses and not being able to increase the interest rate comparatively. Similarly, the average interest rate of deposits has increased to 12 percent. According to industrialists who have been warning that they will not stop their agitation until the interest rate which has been rising continuously in recent times, the government and the Nepal Rastra Bank can use various ‘tools’ to reduce the interest rate if they want.
“The interest rate of the repo being issued by the National Bank is 8 percent, the average rate of such repo in India is around 2.5 percent, the interest rate will come down as soon as the National Bank reduces the repo rate,” Kandel said.
He said that rising interest rate can be controlled by issuing repo at cheap interest rate like in India. Similarly, he suggested that the scams on the deposits of big corporate houses (Nepal Telecom, Nepal Army and Nepal Police, Employees’ Savings and Citizen Investment Fund, Social Security Fund) should be stopped immediately. Kandel said, “If the National Bank announces that it will give limited interest on the deposits of large corporate houses, it will stop the deposit crisis and help control the interest rate.”
In this way, the businessmen demand that the means of bringing in foreign investment should be made easier, the service charges of the banks should be reduced and the profits of the banks should be reduced.
Suyesh Pyakurel, president of the industry organization Morang, says that if the National Bank wants to, the interest rates being raised by the banks can be controlled. According to Pakurail, the subject of interest rate determination is based on an open economy, but the central bank can use various tools if it wants. In particular, he said that a policy arrangement should be made for the manufacturing industries to charge a premium of only 2 percent on the base rate.
Economist Keshav Acharya says that if the government wants to, it can reduce interest rates without interfering with banks.
“If the remittances coming from abroad can be managed, the lack of liquidity can be reduced to a large extent. At present, the exchange rate of the US dollar is 132 rupees, the government should give up to 135 rupees in remittances. By doing this, I see the possibility that the flow of remittances will increase and the lack of liquidity will be solved to some extent, and the interest rate will decrease,” said a former executive of Nepal Rastra Bank. Economist Acharya, who is also the director, said.
Similarly, economists have analyzed that the interest rate may decrease even if commercial banks are exempted from corporate tax. Apart from this, Acharya says that the interest rate will come under control even if the required cash balance (CRR) is reduced. Besides, economist Acharya says that Nepal’s imports should be reduced and exports should be increased, foreign investment should be increased and tourism arrivals would increase, liquidity shortage would be solved and interest rates would decrease.
Even if the government can formalize the informal part of the economy through various means, the interest rate can be controlled. In addition to this, Acharya said that increasing the speed of work on large construction projects and timely payment of completed works will reduce the pressure of lack of liquidity in the market and help control interest rates.