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The Nepal Rastra Bank has lowered the Cash Reserve Ratio (CRR) requirement of commercial banks to release additional funds for lending and has also lowered refinancing rates, in a broader attempt to lower interest rates. The CRR has been reduced by one percentage point on average while one to two percentage points have slashed from the refinancing rates. The bank said its measures were aimed at energising the economy by kick-starting investments. The lower CRR limits would free up roughly Rs 2 billion for investment by commercial banks. But the bank's lowered refinancing rates will not have much effect even on short-term growth prospects. After all, banks have rarely had to borrow from the central bank, mainly because they were until recently awash with liquidity and in any case investment is falling due to the security situation. "The recent decisions will have both indicative and operational level impacts," says Tula Raj Basyal, NRB spokesman. "Even though banks may say the impact of the refinancing rate will not make immediate accounting differences, it may over the long run, when the banks could have to borrow from the central bank."


LATEST ISSUE
638
(11 JAN 2013 - 17 JAN 2013)


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