KATHMANDU, June 17: Nepal Rastra Bank (NRB) is introducing interest rate corridor from next fiscal year, under which the central bank will set lending and deposit interest rates, known as ceiling and floor rates, and allow rates to fluctuate in between these bands to reduce the volatility in inter-bank rates, NRB Governor Yuva Raj Khatiwada said on Sunday.
“The operation process of monetary policy from next financial year (which will begin in mid-July) will be guided by this principle (of interest rate corridor),” Khatiwada said at a press meet held in the Ministry of Finance.
The central bank, through its mid-term review report of the monetary policy, had envisaged the plan to introduce the corridor so that it can set rates keeping in view inflationary pressure and rates at Indian banks, among others, so that the monetary policy becomes more effective in reducing volatilities that can affect the country´s economy.
“In this regard, we have formed a team, which recently conducted studies on experience of India and Sri Lanka, which have introduced interest rate corridor,” Governor Khatiwada said. “The team will soon submit their reports based on which we will introduce the system in Nepal.”