NRB cash margin policy results in declining imports of goods


January 23, 2022


NRB cash margin policy results in declining imports of goods

Representative image.

KATHMANDU: The import of about 20 commodities has declined after the Nepal Rastra Bank (NRB) imposed a provision of cash margin on the import of selected goods.

The NRB had issued a circular on December 20, 2021, provisioning for importers to retain 100 percent cash margin in their bank account while applying for Letter of Credit (LC) on import of 18 items and 50 percent cash margin on the import of two other items.

Traders used to get the LC based on loans provided by banks and financial institutions in the past. NRB adopted the policy of cash margin on imports as foreign exchange reserves were depleting in the country in the face of increasing imports.

As per the NRB cash margin policy, importers needed to maintain 100 percent cash in their bank account before applying for LC for import of chocolate, chewing gum, energy drinks, cigarettes, perfumes, cosmetics, shampoos, hair oils, wood products and furniture, shoes, caps, umbrellas, artificial flowers, marble, toilet and kitchen materials, silver, furniture made of iron and plastic furniture. Likewise, importers of vehicles were required to maintain at least 50 percent cash in their bank account.

The impact of NRB’s cash margin policy is being witnessed as imports of the 20 items have declined by around Rs 2 billion.

According to the Department of Customs, Rs 64.15 billion was sent abroad to import the 20 items (now under cash margin policy) till mid-November last year, the amount swelled to Rs 76.51 billion by mid-December and to Rs 87.24 billion till mid-January. This was .

Prior to NRB’s mid-December policy, the import share of the said 20 items was 12.44 billion until mid-December. However, with the implementation of NRB policy, the import amount has been reduced by around Rs 2 billion as of mid-January.

From mid-December to mid-January, the import of 20 items incurred Rs 10.64 billion, which is 1.79 billion less than the preceding period of 30 days.