NRB proposes new refinancing scheme with 3-5% interest rate

Kathmandu, Jun 2

The Nepal Rastra Bank (NRB) has proposed a new refinancing scheme with the interest rates ranging from 3-5 per cent.

In a draft of NRB Refinancing Procedure 2020, made public the other day, the central bank has categorised the refinancing into three categories – micro, cottage and small enterprise (MCSEs), special, and general refinance loan with 5, 3 and 5 per cent interest rates to be charged on the clients.

The draft includes the provision to enable the Banks and Financial Institutions (BFIs) to mobilise the refinancing which is under the NRB's domain so far.

If the draft is passed without any amendments, the private sectors will mobilise about 70 per cent refinance loan while the central bank will manage the remaining 30 per cent.

This 30 per cent will be channelled to the projects of national importance and pride and government suggested projects and sick industries. The money will be used in the business of national priority.

The NRB will provide funds for refinancing to the BFIs at the rate of 2 per cent for MCSEs, 1 per cent for special and 3 per cent general refinance loan.

The NRB has formulated a new refinancing policy to support the businesses and industries affected by the coronavirus pandemic in their revival.

According to the draft, the ceiling of the refinance loan mobilised to the banks and financial institutions (BFIs) by the central bank will be reduced to maximum Rs. 100 million from the existing Rs. 500 million.  However, the NRB can invest up to Rs. 200 million maximum per client.

General refinance loan per client can be as much as Rs. 200 million but such loan would not be higher than 20 per cent of the total money on which the refinancing will be provided.

Likewise, class 'D' microfinance institutions will get 10 per cent refinancing facility of their total refinance loan eligibility.

Such facility will be provided for a term of one year.

Financial statements of the clients will be instrumental while providing the refinancing facility. The draft has provisions to tally financial reports of the latest fiscal year of the clients with the tax it paid to the tax office, counting debt to equity ratio and assessing whether the business is important in terms of its contribution to the national economy.

Business and industries involved in the production and distribution of cigarette, cigar, tobacco and liquor will not get the refinancing facility. Overdraft, margin lending, auto loan, real estate loan, social loan and other loans for individual purposes are also exempted from the facility. Likewise, borrower enjoying the concessional loan will also not get the refinancing.

Published in The Rising Nepal daily on 3 June 2020.