NRB to soften rules to help banks meet goal

- POST REPORT, Kathmandu

Jan 11, 2015-

Nepal Rastra Bank (NRB) has proposed to boost the minimum lending requirement to agriculture and hydropower to 12 percent from the present 9 percent, but it also plans to soften the rules to make it easier for commercial banks to fulfil the target.

Under the central bank’s priority sector lending obligation which is scheduled to come into force at the end of the current fiscal year, commercial banks will have to direct a minimum of 12 percent of their total loan portfolio to the farm and hydro sectors.

A senior NRB official said that the central bank would be creating a provision which will permit banks to consider loans approved for any hydropower project as lending done to the sector.

Presently, such loans are considered to have been accomplished only after the money is disbursed. Banks have been complaining that since they start lending to hydropower projects once the equity is spent, it takes a long time for them to disburse all the approved loans.

Himalayan Bank’s CEO Ashoke Rana said that the central bank’s refusal to allow approved loans to be counted as hydropower lending was one of the reasons why lending to the sector looks small.

Lately, there has been a growing trend among commercial banks to help generate financial resources for viable hydropower projects. Many consortium financing deals have been completed for hydel projects.

The central bank official said that NRB believed that once the new provision comes into effect, commercial banks would be able to show that they have lent 12 percent of their total loans to the agriculture and hydropower sectors at the end of the current fiscal year.

According to NRB, credit to agriculture and hydropower stood at 9.03 percent as of the first quarter, up from 8.43 percent in mid-July 2014.

Out of the total credit of Rs 970 billion extended by commercial banks, the agriculture and hydropower sector received Rs 87.59 billon.

Overall lending to the productive sector including loans to tourism and cottage industries and agriculture and hydropower also swelled during the first quarter of this fiscal year.

According to NRB, average lending to the productive sector increased to 14.27 percent from 13.54 percent. Banks are required to provide 20 percent of the total credit to the productive sector within the next six months.

Published: 12-01-2015 09:39

User's Feedback

Click here for your comments

Comment via Facebook

Don't have facebook account? Use this form to comment