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I warned about this a year. The blame goes to people like yuraj k, nepal of NRB, NRB, so called experts, social media, bharya bankers etc.



They were force fully promoting so called productive sector loan.




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Sat Jan 05, 2019 3:11 pm
https://forum.sharesansar.com/topic.php?id=5446



Elaborated cause and prolonged liquidity crisis:

1: Unspent cash in Govt coffin
2: CCD ratio
3: Forced loan for so called productive sector.

I want to elaborate the 3rd one, since I have been talking about 1 and 2 for a long time now.


When liquidity crisis started, when every body including NRB, so called expert, politician, wanna be expert in social media all blamed BFIs for liquidity crisis, I blamed unspent cash in govt coffin. And some time later I added CCD ratio.

They were blaming bfis giving 5/10 billion more loan than they should, l went against the whole country and said its cause cash outside the system- govt coffin and CCD ratio.

Last year or so, many have began to blame 1 and lately some are adding 2 too. So my job is done here regarding 1 and 2.

Now during last few days, I have added third most reason.

Let me elaborate it.

Let me explain the easier one first.

If bfis had given share loan first then other priority sector then, this happens:
- give 100 share loan. Then immediately would have returned 100 back to bfis.
- Then give 80 to hydro then 60 would have returned and 20 would have left Nepal.
- Then give 48 to hydro, then 36 would have returned and 12 would have left nepal.
- then give 28 to hotel/cement again, then 14 would have returned and 14 would have left nepal.
- Then give 11 to agri loan. And 9 would have returned and 2 would have left nepal.
- then give 7 to industry. and 2 would have returned back to bfis and 5 would have left nepal.
- then give that 1 to retail loan.

Here, total liquidity created would have been: 100+ 80+48+28+11+7+1=275
In this scenario, Share would have govt 100, remember, share market capitalization is half of GDP and both SMC and GDP are undervalued and very small.
Hydro would have govt- 128
Hotel/cement- 28
Agri- 11
Industry- 7
Retail- 1
Here all gets healthy required capital.


But due to so called priority sector, this happens:
- give Hydro 100, 75 would have returned, 25 would have left nepal.
- give hydro 60, 45 would have returned, 15 would have left
- give hotel/cement/industry 36, 16 would have returned and 20 would have left
- Give 12 to agri, 9 would return and 3 left
- give 7 retail, 2 would return and 5 left
- give 1 to share

Here total liquidity had been created= 100+60+36+12+7+1= 216
Here, Hydro would get 160, hotel/cement/industry would get 36, agri 12, retail 7 and share 1.
Here, hydro gets too much capital, and share very low. And share price falls. And local instead of investing in hydro, they buy alcohol. Public dont want to invest in share and instead spends on luxury.

So difference would be, 275-216= 59 , 20%. Bfis loose 20% business so they push loan with money they cant loan.



But that's not the worst.

Here is the hard part: hard to understand if you are not a really good economist.


Remember, current dactor governor, he is not good in banking or economics or money. There is a saying in Nepal "duplicate sadu use more ashes".

Since, he does not understand fiscal policy, and since no one in NRB understands fiscal policy, When during his first fiscal policy, he increased requirement for priority sector loan in BFIs' loan. And if I remember, from Next year, liquidity crisis started. And Next year, due to liquidity crisis, he tightened share loan, personal loan and increased requirement for priority sector loan again. He kept on increasing every year and liquidity crisis only got worst.

I explained above how so called priority sector loan is the third biggest reason our liquidity crisis got worsen.

Wanna be economic expert in social media all talks about giving priority to so called productive sector while giving loan. When going gets tough, tough gets going.


Now let me talk about the real danger created by micro management of Money by NRB, sarba gani yuraj k's fixing of high priority sector loan. They have forced BFIs to give a big big portion of loan to so called productive sector.

In economics, pushing hard something always leads to crisis. I have been advising not to force banks to give too much loan to priority sector if there is no healthy demand. So reduce percentage of such loan.
Or at least, instead of telling BFIs to give 40% loan to priority sector, tell bfis to separate 40% loan to priority sector. If there is good demand then banks can give, if not hold that cash. Which would help in maintaining CCD ratio too.
I dont even remember is that priority sector loan is 40 or 30, they keep in increasing every year.

Here is an example, the devil created by so called force full priority sector loan. """""""""""""HYDRO-POWER"""""""". We all know, lately a lot of latest hydro in development are in bad condition. Its cause bfis are forced to give hydro loan to who ever demands hydro loan. Cause of the priority sector loan.

This is what happens when you make force in economics. In US too, when BFIs pushed for housing loan, There was housing crash in 2008. And bill clinton pushed for that loan.

In Nepal, NRB, sarba gyani yuraj k is pushing priority sector loan, and I can see potential crash in hydro sector, probably cement industry too.


So reduce percentage of priority sector loan and change policy to, BFIs should hold certain percentage of cash to priority sector loan. They dont have to give it if they dont find right candidate.



Top three reasons behind liquidity crisis:

1: Unspent cash in Govt coffin
2: CCD ratio
3: Forced loan for so called productive sector.



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Hydropower sector will not sink alone. It will also pull the BANKING sector and general public deposit. So government must act wisely, otherwise dark cloud is looming above our economy.

IPP sector is doomed. Kukhura chor, kapada sauji, jagga byapari sabai hydro developers bhaye pachi yestai ho.

Most of the IPP developers have ZERo knowledge about hydropower. Most didnot do feasibility study properly, and now crying about 55% less production?

Investment in so called real sector is not always profitable, realistic and balanced approach is needed. Eg of TOO MUCH sugar.......

खर्च अभावले २० जलविद्युत आयोजना डुब्दै, लिलाम गरिदिन सरकारसँग आग्रह

रुग्ण आयोजनासँग भएको पिपिए आधारमा विद्युत उत्पादन ५५ प्रतिशतसम्म कम - यसो हुँदा बैंक ऋण तिर्न सक्ने अवस्था छैन ।
यही कारण सर्वसाधारणको निक्षेप रहेको ३६ अर्ब रुपैयाँभन्दा बढी लगानी पनि डुब्ने अवस्था रहेको

Reduce CGT through upcoming budget and declare it final, then see the effect in revenue volume - suggestion to Finance Ministry,IRD and team- Pre Budget suggestion


THANKS to all (Finance Ministry,IRD and team.) for considering the suggestion, but later part has still not been addressed

जलविद्युत कम्पनीलाई लगाम, अब आइपिओपछि हकप्रद सेयर निष्कासन गर्न नपाइने
What will happen to RS applied by those hydropower already listed in NEPSE eg API, NGADI, BARUN ???
SEBON must clear this doubt before the directive come in effect.

Provide good incentive to MERGER accepting banks especially weak and small ones. Eliminate A<B<C<D categorization of banks and treat them according to there strength.

Reduce CGT through upcoming budget and declare it final, then see the effect in revenue volume - suggestion to Finance Ministry,IRD and team.

-पछिल्लो समय लगानीकर्ताहरु प्यान नम्बर लिएपछि करको थप दायित्व सिर्जना हुन सक्ने भन्दै सशंकित छन्। यस विषयमा लगानीकर्ताहरुले स्पष्ट जवाफ मागिरहेका छन् ?
-Is it possible to adjust loss from profit while filling tax details at the end of fiscal year ?

Why cant they answer simple and genuine questions from investors ?
If they dont answer these questions, its obvious to doubt there intention.

हाल बजारमा काराेवार भइरहेकाे सम्पूर्ण NABILP काे conversion काे लागि राष्ट्र बैंकबाट स्वीकृत भएकाे र AGM बाट पास गर्ने सूचना निस्केपछि NABILP काे काराेवार राेक्नुपर्ने हाेइन र ? एउटै बस्तुकाे दुइवटा मूल्य जस्ताे देखियाे ।

Housing Bear Who Called 2018 Slowdown Says Worst Yet to Come- Bloomberg

Real state price in Nepal (Urban Area) already surpassed major cities in the world like Newyork, London etc.
So our regulators must think seriously in this matter.
Reason behind "FREEZED INDUSTRIAL GROWTH" in Nepal is 'EXPONENTIAL REAL STATE PRICE HIKE' So most of the people invested in "JAGGA" and preferred to become DALE.
Now BIG BUBBLE is already formed in the sector of REAL STATE. Dont know when will it blast. But whenever it happen it is going to take away many things in the flood. Major investment of most of the financial institution is in real state sector. Government- take appropriate measures before its too late.

Fully agreed, govt should regulate extreme circumstance. That is why they have to fix max interest of 10% on loan for bank.

If they had fixed that rate three year back when warned them about banking crisis (I also warned them about NEPSE crisis), this day would not have come.


And I totally disagree. Current situation is still extreme. Interest rate has fallen just .5% from peak.


FD rate should be just above inflation rate. Which is around 4.5%.

Regulations by government side is needed only at the extremes like 14% on FD some weeks back and 1% interest on saving few years ago. During normalacy like now regulator interference will only worsen the financial health of the country.
Regarding the interest rate of any country, there are multiple factors which determines it. Most important one is the inflation. Inflation rate of USA (last 50 year) is less than 2%. You can get loan @2-3%. Real inflation rate of Nepal stands in double digit in most of the year. So you cant expect developed nations lending interest rate here in NEPAL too. Off course there should be balance so neither depositor nor loanee suffers. Loan interest <6% will not do justice to millions of small scale depositors.

I fully support limiting interest rate within limit.

Max 10% for bank, 11 for dev and 12 for finance.


All civilized country fix their rate using mechanism.



free market- those talking about free market, tell me something? should it apply where it favors you and ignore where it does not? they only will look like a hypocrite if they talk about free market.


I am the greatest supporter of free market but there is always going to be a limit.

Free market should determine interest rate but that should be below 10%. How much below should be determined by free market? What happens when there is banking crisis caused by high interest rate?

As per free market, if you cant pay interest/loan bank should go bankrupt along with the borrowing company, not the owner of the company? why does free market does not apply in this case. check indina market, where bfis are in trouble cause borrowing company cant pay back loan. but in nepal, bank take 300% collateral and personal guarantee. So stop selective support for free market. it only expose you as a hypocrite.

अहिले उद्योगी व्यापारीहरु ब्याजदर एकल अंकमा झारिदेऊ भन्दै विभिन्न निकाय हुँदै प्रधानमन्त्रीसम्मै डेलिगेसनमा जानुभएको अवस्था छ । भोलिका दिनमा बैंकका निक्षेपकर्ताले पनि हामीलाई यति नै ब्याजदर चाहियो भन्दै तिनै ठाउँमा डेलिगेसन गए भने अवस्था के होला ? निक्षेपकर्ताले पनि व्यापारीले झै हामीलाई यति नै ब्याजदर चाहिन्छ भन्दै जुलुश निकाल्न थाले भने???
Valid question for open market system.

NRB should fix max interest:

Saving a/c: 5% max
FD for institution: 5.5% max
FD for public: 6.5%
FD for elderly (male above 55 and female above 50):7%

Interest on loan:
For bank: 10% max
For dev: 11% max
For finance: 12% max


Min interest rate on deposit: 2.5%

बैंकको व्याजदरमा अर्थमन्त्रीको चासो, व्यवसायी र बैंकरलाई सोधे- तोकिदिउँ ?

Better is to fix the DEPOSIT and LENDING rate to tide over the current crisis in such a way that neither DEPOSiTOR nor LOANEE will become a looser. It can be reviewed latter.

FINANCE MINISTER must think on this option seriously.

Yes it did happened in india too....


Dabur India Share price did fall that time !!

History repeats.

When yuraj k was governor, IPO subscribers used to loose money, now same yuraj k is fm, history repeats.




WOW
एनसेल पूँजीगत लाभकर फैसला: एक्जिएटाको शेयर मूल्यमा गिरावट


Probably for the first time in the history of Nepal, decision in Nepal has affected share market of other country.

By the way, does any body know if share market in India fell due to indian blockade?????

What to do many of Investor has been taught in the Past that investment through IPO / FPO, Never loss can be incurred. So that theory has occupied their Mind. In recent time some of the Investor eyes has got opened with times Investors will know all the facts of Investment.

Happy Investment !!

Universal power काे IPO नबिक्ने सम्भावना बढी देखियाे । अर्काे पटकदेखि Capital हरूले Hydro काे IPO पनि नबेच्ने भए । १०० रूपैया भन्दा कममा Hydro काे Share बजारमा पाइने भएपछि ३ वर्ष Lock हुने गरी Promoter पनि नपाइने भयाे । Hydro बाट नेपालकाे उन्नतिमा ठेस पुग्ने सम्भावना देखियाे । बधाइ छ अर्थ मन्त्रीलाइ धेरै धेरै ।

stock market acts as a CATALYST for every other economic sectors of the country. So take appropriate measures in mid term review of monetory policy to strengthen capital market. Otherwise you are at the verge of FREE FALL.

BIG MERGER has now become a NECESSARY EVIL. It will strengthen the financial institution capacity hence unhealthy competition and also reduce the supply side in capital market. Finance minister and NRB should initiate the process soon.

Those are for public.

I was amazed, there is public who would buy bond. Only person I know who bought bond was Oli's wife which Oli declared during his property discloser.

बैंकहरुको ऋणपत्र बिकेन !!!
Don't you think this is alarming ?