NRB to import greenbacks to beat dollar droughtIn a bid to ease the greenback shortage in the banking system, the central bank has initiated the process to import US dollar bills from Singapore.
In a bid to ease the greenback shortage in the banking system, the central bank has initiated the process to import US dollar bills from Singapore.
According to a senior official at Nepal Rastra Bank (NRB), the central bank is planning to import bills worth $10 million in different denominations.
“Discussions on the issue are being held at the executive director level,” said Shiva Raj Shrestha, deputy governor at the NRB.
The central bank, however, is yet to decide on whether to allow commercial banks to import the greenbacks.
Some commercial banks last week had told the Post that they would have to import the greenbacks from abroad to address the shortage of dollar bills in the banking system. Standard Chartered Bank Nepal Limited (SCBNL), Nepal Investment Bank Limited (NIBL), Himalayan Bank and Nabil Bank among others had said they were mulling over the plan. NRB officials said the central bank is yet to receive formal proposal from commercial banks to this effect.
NRB officials said that while they are positive about allowing commercial banks to import the greenbacks, the central bank is concerned about rate distortion. “The [extra] cost involved while importing the dollar bills could lead to rate distortion, and we are seriously concerned about it,” said the official at the central bank.
Sources at the commercial banks said they are waiting for a decision on cost adjustment from the NRB. Besides transportation cost, insurance and safety are other important issues that need to be addressed before the commercial banks are allowed to fly dollar bills into the country.
According to Rajendra Pandit, assistant spokesperson for the NRB, the commercial banks have estimated that it would cost around fifty paisa per dollar while importing the bills from Singapore.
“The NRB can distribute the dollar bills without adding the import cost, but if commercial banks are allowed to import the greenbacks from abroad, they will also have to be allowed to charge the import cost,” said the NRB official. “And this could lead to rate distortion, as there will clearly be some difference in exchange rates set by the central bank and the commercial banks.”
Diwaker Poudel, corporate affairs head of the SCBNL, said though bankers have been holding discussions with the central bank about importing dollar bills, no significant progress has been made so far.
Commercial banks were getting $5,000 in cash from the NRB every week for foreign exchange facility, but of late the central bank itself is struggling to fulfill the demand in view of shortage of dollar bills.
Bankers say multiple reasons have led to dollar drought in the banking system. Nepalis’ preference for US dollar in cash while travelling abroad, use of plastic money (debit card, credit card) by tourists visiting Nepal, dollar exchanged by money changers not reaching the banking system and Chinese traders opting for US dollar in cash for payment are some of the reasons, say the bankers.
Earlier, the NRB used to deposit around $10-$1.5million at a Singapore-based bank every week, but it has not done so for the last three-four months. Amid the crisis, commercial banks have been forced to limit the exchange facility to maximum $500 for those travelling abroad.
Of late, banks have been requesting people who approach them for US dollars to opt for dollar debit card instead of cash. While most of the banks now issue dollar debit card, Nepalis travelling abroad still prefer cash.
Dollar liquidity is expected to grow later this month as the tourist season starts in September, said central bank officials.