PM asks BFIs to be flexible in interest rates

Kathmandu, Feb. 16: Prime Minister KP Sharma Oli on Saturday assured the private sector that the government would look into the issues of high interest rates and regulate the rates at the earliest. 

“Mobilising loans with conditions and increasing interest rates at BFI’s discretion is not appropriate. The government will look into the issue and regulate it,” he said in a meeting with a delegation of the Federation of Nepalese Chambers of Commerce and Industries (FNCCI) led by its President Bhawani Rana at his residence at Baluawatar.

PM Oli directed the Finance Minister, Dr. Yuba Raj Khatiwada, and Governor of the Nepal Rastra Bank (NRB) Dr. Chiranjibi Nepal to listen to the problems of the business community and find solutions at the earliest. 

He urged the banks and financial institutions (BFIs) to show flexibility in the interest rates and give priority to investment to the productive sectors. 

There is a need to divert the investment in the areas that can generate employment opportunities and contribute to the national economy, he said 

“The BFIs should invest in the sectors that have high potential of employment generation, make the country self-reliant in certain goods and products, and help in increasing export or substitute import,” he recommended. 

“Your investment should contribute to the economy, therefore, you have to find such areas and be flexible in the interest rates while mobilising investment in those sectors. Invest more in agriculture and charge the minimum interest and reduce investment in luxury goods and charge higher interest rates,” he added. 

The financial system in the country is facing liquidity crunch since the last couple of years and large projects are facing difficulties in finding sufficient financing. 

Although the banking sector regulator, NRB has been putting its efforts to ease the interest, the shortage of money in the financial markets has forced the banks to give up to 12 per cent interest in the deposits which has pushed the interest in the loans higher than 14 per cent. 

The FNCCI delegation led by its President Rana has met the PM to inform him about the problems caused to the private businesses by the exorbitant interest rates of the BFIs and suggest the possible solutions to it. 

PM Oli assured the private sector that the government would create an environment for open market competition by breaking syndicates and cartels. “The government is ever ready and positive to listen to the private sector’s problems and address them in due time,” he said.

Rana said that the FNCCI found the government positive in addressing the investment challenges, especially the high interest rates. 

“We are hopeful that the government will work to ease the interest rates. The Finance Minister and Governor have also assured us to find amicable solutions,” she said.

Published in The Rising Nepal daily on 17 February 2019.