NRB Penalized Siddhartha Bank Ltd. 17 Thousand

Nepal Rasta Bank (NRB) has penalized Siddhartha bank ltd (SBL) Rs. 17000 for not maintaining cash reserve ratio (CRR). NRB has punished SBL thrice for the same reason during this current fiscal year 2065/2066. On Wednesday, the central bank has decided to penalized SBL third time for not maintaining the CRR during Magh 26 to Falgun 3 (8 Feb 2009 to 14 Feb 2009). The bank has paid Rs. 46947 as the first fine, Rs. 41230 for second time during this current fiscal year. Before SBL, Bank of Kathmandu, Prime Commercial bank, NIC bank had also paid fine to NRB for short CRR. On Tuesday (23 June, 2009) NRB had Penalized Nabil bank Rs. 75 Thousand for the same cause. According to the monetary policy, banking and financial institutions should compulsorily maintain CRR 5.5 percent of total deposits. If the bank fails to maintain CRR for the first time, NRB fines according to the inter-bank rate. At present, inter-bank rate is 6.5 percent. If any bank falls short to maintain CRR, the fine will be levied in three phases. In case the financial institutions fail to maintain CRR for the first time, they will be charged on inter-bank rate (6.5%) and this rate doubles if the same practice is carried out for the second time. Moreover, the penalty charge for the third time will be thrice the inter-bank rate (19.5%). According to BASEL-II, 20% liquidity should be maintained by the commercial banks. It is thought that this liquidity limit has also created complexity to maintain CRR. Earlier, bankers association has appealed NRB to decrease CRR ratio by 1 percent citing the liquidity problem in the market. If CRR is decreased by 1%, Rs. 4 billion liquidity will be accessible in the market. NRB has also penalized banks who failed to provide the loan to rural people. Lumbini bank Ltd. has to pay fine Rs.21612 to NRB for the same reason, said NRB source. The bank has fined due to the low investment in rural sector during the first quarter of the current fiscal year. There is the provision to invest 3 percent in remote areas of total loan investment made by banks. Previously, NRB has penalized Nepal Bangladesh Bank Rs. 1850178 for the same cause.

Source: Jamb news source