Former Governor Mahaprasad Adhikari Suggests Monetary Committee Should Advise Rather Than Direct Nepal Rastra Bank

June 21, Kathmandu – Former Governor Mahaprasad Adhikari has advised that the Parliamentary Finance Committee should not issue directives to the central bank. Instead, he urged the committee to provide necessary recommendations in the upcoming fiscal year’s monetary policy, rather than directives. He emphasized that situations where the committee issues directives which the central bank cannot implement should be avoided.

Adhikari stated that when the committee offers suggestions on monetary policy, the central bank can exercise its autonomy to formulate policies in the best interest of the economy. Considering the current economic and financial conditions, he anticipates a somewhat relaxed monetary policy for the upcoming fiscal year. He also advised that there is no necessity for the central bank to maintain the current policy rates.

Highlighting the exchange rate stability pegged to the Indian rupee, Adhikari explained that the central bank has limited room for maneuver. “We are providing further support from financial sector policies to make monetary policy implementation more effective,” he stated while advising the central bank in the finance committee. He also expressed the view that extending the classification period for non-performing loans to relax standards is not advisable.

Adhikari noted that it took Nepal 20 years to comply with regulations established by the Bank for International Settlements (BIS) and stressed that there should be no regression. “If we retreat now, it will be difficult to meet those standards again,” he added. He suggested that banks could explore alternative options to maintain profitability. “No banking system in South Asia is as secure as Nepal’s. Policies should not be unnecessarily manipulated to weaken the system,” he said. He expressed confidence that the economy will be stronger the more autonomous the central bank is in formulating monetary policy.