May 21, 2020 | Investopaper
Preparations have been made to allow the banks and financial institutions to mobilize the refinancing amount of the concessional rate provided by the NRB with the objective of assisting in the expansion of credit investment and export to the productive sector. For this, NRB has started internal homework. Banks and financial institutions will be able to mobilize funds directly by providing refinancing facility at concessional rates targeting small borrowers.
Currently, a borrower has got a maximum refinancing facility of up to Rs 500 million. NRB is preparing to provide refinancing facility of up to Rs 100 million per borrower by reducing it. NRB is collecting suggestions on the method and system to be followed to allow the bank to operate refinancing. For this, the guideline prepared by NRB will be posted on the website. It is said that the working procedure will be revised based on the suggestions received. NRB has introduced concessional loan (refinancing) facility from the fiscal year 2019/20. At present, it has been pursuing the policy of providing concessional loans to the specified productive sector, poor class, export and other sectors. NRB has been providing refinancing facility at different rates in general, special, export, earthquake victims and other sectors.
At present, NRB has been providing refinancing loans to banks and financial institutions at low interest rates. Banks and financial institutions have used about Rs. 20 billion under this program till last Chaitra. The government has directed to increase the current refinancing fund from Rs 60 billion to Rs 100 billion.
NRB is going to revise the refinancing procedure so as to maintain the provincial balance in the areas where the impact of COVID-19 is high. NRB has made such preparations to facilitate the flow of refinancing in the areas most affected by Corona. Similarly, NRB has directed banks and financial institutions to provide 5 percent refinancing facility to small and medium enterprises (SMEs) under project loan. Due to the flow of such loans, banks and financial institutions get loan facility from NRB at 2 percent.
Under the general refinancing, facilities will be provided for hydropower projects, agriculture, livestock and fisheries businesses, industries and businesses run by youths who have returned after employment or study abroad, manufacturing industries, tourism industries and construction of physical infrastructure. While providing refinancing, priority will be given to the highly undeveloped and undeveloped sector productive industries mentioned in the Industrial Business Act, 2073.
Refinancing facility is also available for establishing well-equipped hotels in Pathibhara, Maipokhari, Bhimeshwar, Kalinchok, Halesi, Langtang, Swargadwari, Upper Mustang, Gadhimai, Janakpurdham, Rara and Khaptad. Banks and financial institutions also provide such loans at an annual interest rate of 3 percent.
There is an arrangement to provide refinancing at the interest rate of 1 percent per annum on the collateral of loans provided by the government for sick industries, domestic and small scale industries and foreign employment. “If ostrich, cardamom and beekeeping are exported, refinancing will be provided at the rate of 1 percent per annum on the basis of collateral security of good loans so that the amount equal to the export does not increase,” the procedure said. There is a legal provision to provide refinancing at 1 percent interest rate per annum to secure the collateral of good loans provided to small businesses run by Dalits, Janajatis, oppressed, women, poor and people belonging to the community.
As of Chaitra, the total refinancing investment is Rs. 18.37 billion including general refinancing of Rs. 15.21 billion and export refinancing of Rs. 744.4 million. In the same period, Rs. 1.89 billion has been invested out of the previous refinancing provided to the earthquake victims for housing construction. Currently, 1,592 borrowers are using the loan.