The interest rate volatility in the domestic financial market is one of the woes which the Nepal Rastra Bank (NRB) would like to deal with. In fact, it is mulling formulation of an interest rate corridor from the coming fiscal year as an additional monetary instrument. This is quite welcome due to the very fact that the swings in the interest rates has the whole financial market worried. The said corridor is said to be one which determines the ceiling and floor for the interest rate. As part of the plan, NRB will indicate the interest band by determining the maximum rate at which the bank will sell securities, and the minimum rate at which it will purchase securities. The interest rate of treasury bills, being used as repo instrument and inter-bank lending rate indicate the movement of short-term rates. Once enforced and respected by the banks and financial institutions, the volatility can be done away with at least in the short term. And it will be pre-determined that the movement of the short-term interest rate will take place between the two extremes. It means that the high and low of the interest rate will hover within the corridor making transactions more predictable, unlike what was observed two years back, and the BFIs have yet to recover. The liquidity crunch and then having the reserves with few borrowers had put the banks in big trouble. The lending rates have remained high, but the interest rate that they offer to the customers has gone down rapidly. The BFIs may be in trouble as reported, but the entrepreneurs are not interested in taking out loans at a high rate which cannot give them the returns because of a myriad of problems including labour disputes, power outages, national policy flaws and so on.
To go for the interest rate corridor was long demanded, but the central bank had only urged the BFIs to follow, which was not mandatory. However, now the move is to make it a part of the monetary instrument to protect the financial market from the short-term volatility which in no way benefits the financial market or the economy in general. Once this is decided upon, unlike in the past when the NRB used the repo and reverse repo rate to guide the interest rate, which was an unsuccessful attempt, the economy will improve. The glaring example is that while the treasury bills are being traded for less than one per cent, the lending interest rates in the market is over 15 per cent which reflects the diversion. While the banks have not been able to invest the surplus deposits, they have compensated it by keeping the lending rates unusually high, which is basically responsible for discouraging possible borrowers.
The central bank must in earnest implement the interest rate corridor in the interest of the BFIs, the borrowers and the depositors at the same time. Maybe then the banks will be helped to be more reasonable as far as the interest rates are concerned and to make profitable investment of the surplus deposits. Now, there should be no backtracking from the corridor, that is being worked upon by NRB, for stemming the short-term volatility in the financial market.
Those not possessing private vehicles have difficulty commuting at late night in the capital city. There are only night taxis plying then, and these charge hefty fares which the common man can ill-afford. As a result, the general pubic suffer especially when they have businesses of urgent nature to attend to like ferrying the sick to the hospital. Now that an agreement has been reached between transport entrepreneurs and the Kathmandu Metropolitan City to have several buses plying in several routes from 8 to 11 pm, this should facilitate many commuters.
Many people who work till late in the night have to walk long distances to their destination in the absence of public transport. These night buses, according to the agreement, will operate from the next month. The agreement reached is for a period of six months. In order that the operation of the night buses become successful it is also necessary to provide the necessary security so that the commuters as well the night bus staff will be able to operate without hassles. Moreover, the night buses should provide the services in a regular manner so that the commuters can rely on them for quality services.