July 22, 2020 | Investopaper
Nepal Rastra Bank (NRB) has recently brought necessary procedures for the provision of refinancing for the implementation of the monetary policy. The central bank has introduced micro, domestic and small enterprise refinancing, special refinancing and general refinancing to address the impact of COVID-19 on the economy.
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As per the working procedure, there is a loan facility of up to Rs. 1.5 million for the small and home enterprises, trades and businesses run by the entrepreneurs themselves. In such refinancing provided by Nepal Rastra Bank at two percent interest rate, banks and financial institutions will be able to charge five percent interest rate from the borrower.
Similarly, special refinancing includes refinancing given priority to special sectors. These include export-oriented industries, women entrepreneurs, and enterprises run by people with different abilities. The borrower will have to pay three percent interest rate on the refinancing provided by NRB at one percent interest rate. The interest rate on ordinary refinancing has been fixed at three percent. Banks and financial institutions will be allowed to take five percent.
The lump sum refinancing period will be one year but it will not be renewed. Similarly, a maximum of one year and six months has been fixed for the refinancing provided to the customer as per the effect of COVID-19.
The maximum limit of refinancing has been fixed at Rs. 50 million but this amount should not exceed 70 percent of the refinancing amount. The maximum limit of refinancing that the bank evaluates according to the customer is set at Rs 200 million. NRB has stated that it will not be more than 20 percent of the total amount.
Similarly, the refinancing amount to be provided to class D microfinance institutions should not be more than 10 percent of the total refinancing amount.
As per the procedure, the bank has clarified that the customers and borrowers of all the states should be included in the demand for refinancing, quarterly details of refinancing should be submitted and refinancing facility should not be available more than once. In case of non-repayment of interest on the date of refinancing on the date prescribed in the working procedure, additional one percent (annual) with penalty interest rate will be incurred. Such institution will be disqualified for refinancing for six months from the date of payment of penalty.