Refinancing Facility Not For Business Earning More Than 20 Percent Return

June 2, 2020 | Investopaper

A business that earns more than 20 percent return on equity (ROE) annually will not get refinancing facility. The NRB is making arrangements not to provide refinancing facility to the industries whose business condition is good and the average annual return on equity is more than 20 percent considering the profit of the last three years. For this, NRB has prepared a draft refinancing procedure. There are 15 days for suggestions on the draft.

Refinancing facility will not be available for loans to  liquor industry and the tobacco business including cigarettes, bindi, cigars, tobacco, khaini, gutkha etc.

Banks and financial institutions will not provide refinancing facility of more than Rs 100 million per person. At present, there is the limit of Rs 500 million per person as loan disbursement.

NRB has been collecting applications from banks and financial institutions and providing them refinancing loans. If the provisions mentioned in the draft are implemented as they are, banks and financial institutions will directly receive 70 percent of the total refinancing amount. Banks and financial institutions will disburse loans by selecting the borrowers who have fulfilled the criteria specified by the NRB.

NRB will disburse the 30 percent of the fund to projects of national importance and priority, projects as per the direction of the government and sick industries. While re-financing in this way, the recipient will not be receive more than Rs. 200 million.

Rs 1.50 Million For Micro, Home and Small Enterprises

Banks and financial institutions will be able to provide up to Rs. 1.5 million per person in enterprises, trades and businesses run by micro, home and small enterprises.

Currently, refinancing funds are classified into micro, home and small enterprises, special and general refinancing. Out of this, 5 percent loan will have to be given to the customers for micro, home and small enterprise loans disbursed by banks and financial institutions. The bank will have to pay only two percent interest on the loan to NRB. In case of special refinancing, the bank will have to pay only one percent interest to NRB. Customers will have to pay no more than 3 percent.  For ordinary refinancing, the bank will have to pay 3 percent interest to NRB. For such loan, customers should pay only five percent interest to the banks.

Suggested Readings:

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


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