NRB To Reduce Refinancing Limit To Rs 100 Million

May 6, 2020 | Investopaper

While the government has said that it will increase the refinancing fund to Rs 100 billion, Nepal Rastra Bank is preparing to reduce the refinancing limit. NRB is going to reduce the refinancing limit taken by the industrialists/entrepreneurs, concluding that only a limited number of entrepreneurs got it.

Governor Maha Prasad Adhikari in a discussion in the Finance Committee of the Parliament on Tuesday said that the NRB is preparing to reduce the current refinancing limit from Rs 500 million to Rs 100 million.

According to him, after bringing this policy, an industrialist/entrepreneur will not be able to take more than 100 million refinancing. He concluded that when the refinancing limit was raised to Rs 500 million, only a few big industrialists got it but small industrialists were deprived of getting refinancing. “Large profitable big industrialists don’t need much. NRB is preparing a plan to encourage small and medium enterprises,” the official said.

He is confident that the smallest debtor will get refinancing when the refinancing limit is Rs 100 million. NRB is preparing to make the refinancing fund one trillion and mobilize it in the productive sector. At present, NRB says that only Rs. 180 million has been floated from the refinancing fund.

Officials said banks and financial institutions could not be instructed to waive interest and loans. He said there was no possibility of a reduction in interest rates as the decision to reduce interest rates had been taken and the submission time had been postponed.

According to him, microfinance and other institutions have not been able to avail refinancing services. Now, in the new procedure, all banks and financial institutions will be able to give such refinancing. “NRB plans to expand access to refinancing by providing those who meet the criteria and not having to go to the NRB for that,” the governor said.

He urged all the entrepreneurs to get rid of the stress of paying bank interest for now and said that they will have to pay in the coming days.

“Time can be extended, there is no possibility of dismissal,” he said. According to Nepal Rastra Bank, the banking and financial sector has collected Rs 36.78 trillion deposits and disbursed Rs 32.46 trillion in loans.

The credit flow from the banking sector is 36 percent above 50 million and 34 percent below 5 million, according to the governor. According to him, the wholesale and retail sector has the highest amount of Rs 660 billion in loans from the banking sector.

As per the official, 7.4 percent of the total loan disbursed from the banking sector has reached Rs 220.43 billion and Rs 532.85 billion in the productive sector.

In the meeting of the committee, former Prime Minister Dr. Baburam Bhattarai said that the credit from the banking sector has gone to the unproductive sector more than the productive sector. Bhattarai, who is also a former finance minister, said deposits were collected from villages and the banking sector only gave loans to the rich.

“Right now, the interest rate on loans in the banking sector is high and the banking sector is trying to make money by playing with money,” he said. Stating that the interest rate in developed countries is 2-3 percent, Bhattarai urged to reduce the interest rate immediately. Stating that there is a problem of not getting loans from banks for those who want to invest in unproductive sector i.e. purchase of vehicles, purchase of house and land but those who want to invest in the productive sector, Bhattarai urged to end such trend.

Suggested Readings:

What Is Refinancing? How One Can Receive Refinancing Facility In Nepal?


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