NRB cuts interest rates by 2% for COVID affected businesses

Kathmandu, Apr 29

Nepal Rastra Bank has announced second relief programme for the entrepreneurs and industries.

It has asked all BFIs to mandatorily reduce interest rate by 2 per cent and barred them to raise it till the end of the current fiscal.

Issuing two directives to the banks and financial institutions (BFIs) the other day, the central bank has asked them to calculate the interest rate for the last three months of the current fiscal year 2019/20 with 2 per cent discount on the prevailing interest rate.

This is the second announcement from the central bank after the country entered into lockdown following the threat from the coronavirus pandemic.

Banks can mobilise up to 10 per cent additional working capital loan to the tourism and aviation industries including hotel, restaurant, resort, travel and trekking, aviation, transportation and poultry.

Ceiling of such loan cannot be renewed, and it should be repaid in a year at maximum.

However, business and industries related to food processing, production and sales, gas bottling plants and distributors, soap and chemicals, pharmaceuticals and distributors, internet and telecommunication, tobacco and liquor and hydroelectricity projects in operation will not be eligible for the discount on interest rates.

Small and Medium Enterprises (SMEs) will get the refinancing facility of up to Rs 1.5 million in good loan on the collateral at the rate of 2 per cent interest.

BFIs will not be allowed to charge more than 5 per cent interest rate in such refinancing facility and for the variation in the interest rate during the loan mobilisation period.

Likewise, Class 'D' microfinance companies should reduce their interest rate by 3 per cent. However, the wholesale lending microfinance institutions need to reduce it by 2 per cent.

The new interest rate provision will be effective till the end of the current fiscal year, mid-July 2020.

The NRB has also directed the BFIs to collect the monthly or tri-monthly instalments of the loan that is due in Jestha (mid-May) by mid-July.

Repayment period for the capital and interest of all short-term loan of working capital nature that needed to be paid during the lockdown period can now be extended by 60 days, said the central bank.

No additional fees or fines should be charged on such payments if made before mid-July.

Published in The Rising Nepal daily on 30 April 2020.