NRB proposes facilities aimed at reviving sick industries

NEPAL Rastra Bank has proposed a number of facilities that the financial sector could extend to help sick industries turn around their fortunes. By categorising the industries into two categories, one with the possibility of reoperation and the other no possibility of revival, the central bank has proposed five types of facilities for the industries that can be revived. The facilities include restricting of loan based on the business plan of sick industries, waiver of extra interest taken as fine for limited period and non capitalization of general interest into the principle. The NRB has also proposed the continuity of the existing facility of refinancing at 4.5 percent from the banks and financial institutions (BFIs) after receiving the amount from the central bank at interest rate of 1.5 percent. “If the bank manages to recover the loans for two years as per the timetable set after loan restructuring, the BFIs are entitled to make just one percent provisioning for such loans,” states the draft of the proposed facilities. If a loan is paid back regularly for two years from the day it is restructured, such a loan will be treated as a good loan allowing a provisioning of just one percent. As for the sick industries that cannot be revived and are willing to settle their loans, the investors of the concerned industries will have one year to sell the assets put as collateral, instead of auctioning such properties by the BFIs. “The move is aimed at maximising the value of collateral to be sold as buyers do not give high value for auctioned properties,” said the NRB. However, the sick industries would have to submit necessary documents proving that borrowers could sell their properties to pay the loan. After proposing these facilities, the central bank has sought suggestions from stakeholders on the proposed facilities. NRB spokesperson Bhaskarmani Gnawali said that the central bank proposed the possible facilities for sick industries on the request of the government. When asked whether the monetary policy to be presented soon would accommodate these proposed facilities, Gnawali said that the NRB would take a decision on it after receiving feedback from the stakeholders. “Proposed facilities could be incorporated in monetary policy after certain revision,” he added. To benefit from the facilities, the concerned debtor needs to file an application at the concerned bank by clarifying his or her intention. The concerned financial institutions can offer such facilities on the basis of the existing legal provision and their working procedure. To avail these benefits, the sick industries will be required to show evidence that the government has declared them sick. Ever since the government introduced policies on sick industries 12 years ago, the NRB has been making provision of various facilities including refinance facility, loan restructuring and waiver of interest and fine interest. However, these measures have been inadequate to revive the sick industries although ‘a few hotels and industries have benefited from the facilities.’