Industrialists of the eastern region have back tracked from their protest programme after the provincial government assured them that the central government would initiate talks to address the exorbitant interest rate charged by the banks. The agitated business people had launched a stern protest against the government and central bank a week ago.

The business people based in the Morang Industrial Corridor have agreed to halt their protest programme which included actions ranging from padlocking the regional office of the Nepal Rastra Bank to handing over their factory keys to the Prime Minister until mid-February. The disgruntled industrialists agreed to halt their protest upon the request of Province Number 1 Minister for Internal Affairs and Law Hikmat Bahadur Karki.

Karki on Friday spoke with Pawan Kumar Sarda, president of the Morang Merchants’ Association and Bhim Prasad Ghimire, president of Chamber of Industries-Morang and assured them that he would lobby with the federal government and the central bank to reduce the interest rate on business loans as demanded by the industrialists.

“We have not dropped our protest programme but have postponed it till mid-February upon Minister Karki’s request,” Sarda told the Post over the phone. “However, if the government fails to check the interest rate charged by banks, we will resume our protest programme.”

Industrialists submitting a memorandum to the government through the District Administration Office, Morang and the regional office of the central bank last week have demanded that the interest rate on loans extended to productive industries should not exceed 7 percent while the interest rate on commercial loans shouldn’t be higher than 9 percent. Karki has promised the industrialists of the region that he will speak with the Finance Minister and central bank’s top officials to address their demands, according to Sarda.

Despite the provincial government’s promise to the business people, the interest rate charged by banks on loans and advances is not likely to go down. In an interview with the Post last week, Nepal Rastra Bank (NRB) Spokesperson Narayan Prasad Poudel had said that the central bank was not in a position to take immediate action to bring down the interest rate charged by banks.   

The NRB can take action against the banks for charging high interest rate on loans only if their spread rate exceeds 5 percent—the threshold set as per the central bank regulation. If banks’ spread rate does not exceed 5 percent, no legal action can be taken.

Bankers on the other hand say that they are operating well below the spread rate of 5 percent set by the central bank.

According them, the interest rates on loans are higher because banks are paying high interest rate on deposits. “When you look at the commercial banks’ unaudited financial report of first six months of the fiscal year, majority of them are operating well below the spread rate set by the commercial bank,” said Bhuvan Dahal, CEO of Sanima Bank.