BFIs allowed to raise lending to deprived sectors in stages

KATHMANDU, JULY 29 BANKS and financial institutions (BFIs) will be able to maintain an increased level of compulsory lending to deprived sectors in two instalments. The central bank has told them that they can increase their lending by 0.25 percent by mid-January and by another 0.25 percent by mid- July 2014. Nepal Rastra Bank (NRB) increased the compulsory lending by 0.5 percentage point for commercial banks, development banks and finance companies through the monetary policy for the current fiscal year. As per the new policy, at least 4.5 percent of the total loans issued by commercial banks must go to deprived sectors. The figures for development banks and finance companies are 4 percent and 3.5 percent respectively. NRB has issued directives to implement the monetary policy that also deal with refinancing, cash reserve ratio and statutory liquidity ratio. The refinancing rate has been cut by 1 percent for ordinary refinancing while it is 0.5 percent for special refinancing. Under normal refinancing, productive sectors such as hydropower, agriculture, fishery, manufacturing, tourism and physical infrastructure will get refinancing at 5 percent from the central bank which BFIs should provide to these sectors at not more than 9 percent. The refinancing rate for exports and special refinancing such as for sick industries, small and women promoted enterprises, Dalits and indigenous communities has been fixed at 1 percent which BFIs have to re-lend at not more than 4.5 percent interest. Even though the definition and identification of sick industries hasn’t been completed, NRB has been collecting suggestions for providing added facilities to them. “The rates have been reduced to encourage both the banks and their customers,” said Bhaskar Mani Gnawali, NRB spokesperson. “The move is aimed at increasing the use of the refinancing facility.” The central bank has slashed the special refinancing rates for the first time in two years while this is the second reduction for ordinary refinancing. According to NRB, refinancing facility worth Rs 2.47 billion was offered to the productive sector in the fiscal year 2012-13. The facility provided in fiscal 2011-12 was worth Rs 868.6 million. The central bank has told the BFIs they can increase their lending by 0.25 percent by mid-January and by another 0.25 percent by mid-July 2014