Serving Business Interests

Despite the gradual receding of COVID-19, Nepal’s economy has been reeling from its aftershock and other hitches. The drawn-out pandemic gave a fatal blow to all the industrial and service sectors contributing to the national economy. That led to an overall economic slump, triggering joblessness, liquidity crisis in the market and high inflation. As an endeavour to cope with the burgeoning liquidity crunch, the Nepal Rastra Bank (NRB) allowed the Banks and Financial Institutions (BFIs) in February and July this year to raise interest rates on deposits as well as loans. Then, interest rates began increasing to as much as 18 per cent. It really created problems for the productive sectors, especially interest-sensitive businesses, to survive. The rise in interest rates badly affects cash flow of small businesses, hampering them from borrowing money and reinvesting it. Though this measure may have been helpful for BFIs to collect deposits, to some extent, most businesses found it quite difficult to pay back loans and sustain themselves.