Nepal Rastra Bank (NRB) Annual Report 2018-19



Executive Summary

  1. According to World Economic Outlook published by IMF in October 2019, the world’s
    economic growth rate in 2019 and 2020 is projected at 3 percent and 3.4 percent
    respectively. The economic growth rate of advanced economies is estimated to be 1.7
    percent, followed by emerging and developing economies at 3.9 percent, emerging and
    developing Asian economies at 5.9 percent in 2019. Similarly, the economic growth
    rates of the neighboring countries India and China are estimated to be 6.1 percent in
    2019, according to IMF.
  2. Inflation is projected at 1.5 percent for advanced economies and 4.7 percent for
    emerging and developing economies in 2019. It remained at 2.0 percent for advanced
    economies and 4.8 percent for emerging and developing economies in 2018.
  3. In 2018/19, the growth rate of gross domestic product (GDP) of Nepal is estimated to
    remain at 6.8 percent at basic prices and 7.1 percent at producers’ prices. In the review
    year, output of agriculture and non-agriculture sectors is estimated to grow by 5.0
    percent and 7.5 percent respectively.
  4. In 2018/19, average consumer inflation rate stood at 4.64 percent. Such inflation rate
    was 4.15 percent in the previous year. In the review year, the average prices of food and
    beverages group and non-food and services group increased by 3.09 percent and 5.86
    percent respectively.
  5. In 2018/19, total merchandise exports and imports stood at Rs. 97.11 billion and Rs.
    1418.54 billion respectively. As a result, trade deficit rose to Rs. 1321.43 billion, 38.1
    percent of GDP.
  6. In 2018/19, both the current account and balance of payments remained at deficit by
    Rs. 265.37 billion and Rs. 67.40 billion respectively. Total foreign exchange reserves
    remained at Rs. 1038.92 billion in mid-July 2019. Such reserves is sufficient to cover
    the merchandise imports for 8.9 months and merchandise and services imports for 7.8
    months.
  7. In 2018/19, the government revenue increased by 19.1 percent to Rs. 865.55 billion
    while the government expenditure based on banking transactions increased by 0.1
    percent to Rs. 1067.67. In the review year, the budget deficit based on banking
    transactions stood at Rs. 187.52 billion.
  8. In 2018/19, broad money and narrow money increased by 15.8 percent and 8.6 percent
    respectively. Similarly, domestic credit increased by 21.4 percent and monetary sector’s
    claims on private sector increased by 19.1 percent. Further, deposits of Banks and
    ii
    Financial Institutions (BFIs) increased by 18.0 percent while credit to the private sector
    from BFIs increased by 19.4 percent during the review year.
  9. In 2018/19, liquidity amounting Rs.100.35 billion was mopped up while liquidity
    amounting Rs. 168.16 billion was injected through various instruments of open market
    operations. Standing Liquidity Facility (SLF) worth Rs.154.33 billion has been utilized
    during the review year.
  10. Weighted average interest rate of lending and deposit of commercial banks stood at
    12.13 percent and 6.60 percent respectively in mid-July 2019. Similarly, weighted
    average inter-bank transaction rate among commercial banks stood at 4.52 percent in
    mid-July 2019.
  11. In 2018/19, the total assets/liabilities of commercial banks increased by 17.7 percent to
    Rs. 3611.93 billion, followed by development banks by 28.3 percent to Rs. 457.66
    billion and finance companies by 16 percent to Rs. 110.01 billion. Similarly, the total
    assets/liabilities of micro finance institutions (MFIs) increased by 58.8 percent to Rs.
    273.06 billion during the review year.
  12. There are 171 BFIs licensed by NRB as of mid-July 2019. This includes 28 commercial
    banks, 29 development banks, 23 finance companies, 90 MFIs and 1 infrastructure
    development bank.
  13. As of mid-July 2019, Deposit and Credit Guarantee Fund (DCGF) guaranteed total
    credit amounting to Rs. 25.66 billion and total deposits amounting to Rs. 603.39 billion.
    As of mid-July 2019, the number of borrowers blacklisted by Credit Information Centre
    Limited has reached 8,620.
  14. As of mid-July 2019, NEPSE index has reached 1259.0 points while market
    capitalization stood at Rs. 1567.50 billion, 45.2 percent of GDP.
  15. NRB announced its monetary policy for 2018/19 on July 11, 2018 with the main
    objective of maintaining macroeconomic stability and facilitating the achievement of
    targeted economic growth of GON.
  16. The main objectives of monetary policy were to conduct monetary management to
    check the demand side pressure on price and external sector stability arising from
    expanding economic activities, promote employment, develop entrepreneurship, and
    mobilize financial instruments towards priority sectors to facilitate the targeted growth.
  17. The existing provision of Cash Reserve Ratio (CRR) of 6 percent for commercial banks,
    5 percent for development banks and 4 percent for finance companies has been changed
    to make it 4 percent for all three institutions. Likewise, SLR has been reduced from 12
    percent to 10 percent for commercial banks, 9 percent to 8 percent for development
    banks and 8 percent to 7 percent for finance companies. The bank rate applied for the
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    purpose of Lender of Last Resort (LOLR) facility and to discount securities has been
    reduced from 7 percent to 6.5 percent.
  18. The existing provision for commercial banks to extend 25 percent of their total credit in
    priority sector has been changed to make it at-least 10 percent in agriculture and 15
    percent in energy and tourism sector.
  19. The provision requiring commercial banks, development banks and finance companies
    to maintain 5.0 percent, 4.5 percent and 4.0 percent of their total credit respectively in
    deprived sector has been changed to 5.0 percent for all three class institutions.
  20. In the review year, a total of 14 BFIs went through the process of merger and
    acquisition to become 7 BFIs while the license of 7 BFIs (merger-2 and acquisition-5)
    has been cancelled.
  21. Financial access has been widening with the expansion of BFIs network. As per the
    government goal of expanding at least one commercial bank branch in each local level,
    there has been significant increase in commercial bank’s presence at local level. The
    commercial banks network which has reached to 631 out of 753 local levels in mid-July
    2018 increased to 735 local levels as of mid-July 2019.
  22. Currency in circulation has increased by 2.6 percent to Rs. 507.06 billion in mid-July
    2019, compared to Rs. 494.37 billion a year ago.
  23. Total number of staff in NRB stood at 1024 in mid-July 2019, comprising 934
    administrative and 90 technical staff. Of the total human resources, 526 are officer level,
    376 are assistant level and 122 are office subordinate level staff.
  24. The bid was called for the reconstruction of Baluwatar and Thapathali building, damaged
    by the devastating earthquake of 25 April 2015 in accordance with the approved master
    plan, drawing, design prepared by consultants appointed as per the MOU between the
    bank and Central Project Implementation unit, Ministry of Urban Development,
    Government of Nepal. Accordingly, the Government of Nepal, National Reconstruction
    Authority, Central Project Implementation Unit (BAWAN) signed an agreement with
    BILIL-Contech J/V for the reconstruction of the building at Thapathali and 25 percent
    construction work has been completed during the review period. Likewise, the
    Government of Nepal, National Reconstruction Authority, Central Project Implementation
    Unit (BAWAN) signed an agreement with Shree CICO Samanantar JV for the
    reconstruction of the building at Baluwatar and 10 percent construction work has been
    completed during the review period.
  25. Payment and Settlement Act, 2075 has been issued and is being implemented with the
    objective to develop and expand safe, healthy and reliable payment system and regulate,
    supervise and monitor related activities.
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  26. In 2018/19, net income before revaluation of gain/loss from foreign exchange and other
    assets increased by 23.46 percent to Rs. 34.43 billion as compared to previous year.
    Such net income was Rs. 27.89 billion in 2017/18.
  27. As per the NRB’s balance sheet of mid-July 2019, the assets/liabilities of NRB declined
    by 7.23 percent to Rs. 1,071.70 billion, compared to mid-July 2018.

World Economic Situation and Outlook
1.1 The world’s economic growth rate has been declining because of shrinking economic
activities in advanced economies, especially in the United States, as well as the
emerging and developing economies. According to the World Economic Outlook
published by the International Monetary Fund (IMF) in October 2019, world’s economic
growth rate is projected at 3.0 percent in 2019 compared to 3.6 percent in 2018 and 3.8
percent in 2017. Similarly, world’s economic growth rate is projected at 3.4 percent in
2020.
1.2 It is estimated that the overall output of the advanced economies will see a rise of 1.7
percent in 2019 compared to 2.3 percent expansion witnessed in 2018. The IMF has
estimated the economic growth rate of emerging and developing economies to be 3.9
percent in 2019 compared to 4.5 percent in 2018. The growth rate of Asian emerging
and developing economies is projected to rise by 5.9 percent in 2019 compared to 6.4
percent growth achieved in 2018. In 2019, the economic growth rate of both the
neighboring countries, India and China, is projected at 6.1 percent compared to their
respective growth of 6.8 percent and 6.6 percent in 2018.
1.3 In 2018, the inflation remained at 2.0 percent for advanced economies and 4.8 percent
for emerging and developing economies. Inflation is projected at 1.5 percent for
advanced economies and 4.7 percent for emerging and developing economies in 2019.
World trade of goods and services is projected to rise by 1.1 percent in 2019 compared
to 3.6 percent in 2018.

NRB Annual Report 2018-19 (English) View Details:

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