NRB announces refinancing procedures

Kathmandu, July 21

The Nepal Rastra Bank has set the period and ceiling of the refinancing facility to the businesses and industries affected by the COVID-19 pandemic.

Refinancing facility provided to the banks and financial institutions (BFIs) by the NRB would be repaid within a year’s period and would not be renewed, according to the Refinancing Procedures, 2020 published by the central bank on Tuesday.

The enterprises severely affected by the crisis should repay the loan obtained under the refinancing facility within a year while businesses affected moderately or minimum should clear it within six months. Such loans can be renewed as per the Nepal Rastra Bank Act, 2002.

Likewise, the BFIs can ask the central bank for as much as Rs. 50 million refinancing per client and the amount must not exceed 70 per cent of the total refinancing facility margin.

The BFIs can lend up to Rs. 200 million refinancing for each client but it should be just 20 per cent of the total eligibility while the class ‘D’ microfinance institutions can only offer 10 per cent of such finances.

In its Monetary Policy for the current fiscal year 2020/21, the central bank has categorised the refinancing facility under three topics: micro, cottage and small enterprise (MCSE) refinancing, special refinancing and general refinancing with 2 per cent, 1 per cent and 3 per cent interest rate to the BFIs. The clients will be charged the interest rate of 5 per cent, 3 per cent and 5 per cent respectively.

The MCSE refinancing is for the enterprises with Rs. 1.5 million loan that are in operation or shut down due to the pandemic or natural disaster but have potential to revive. It also applies to the loans mobilised to the foreign returnee entrepreneurs, agricultural products and processing industries, animal husbandry, hatchery and fisheries, and agricultural input production and distribution.

Similarly, special refinancing will be provided to the loans obtained by the export-oriented industries in operation, disabled, women, indigenous, Madhesi and Dalit entrepreneurs, foreign migrant workers, and sick industries or areas affected by the natural disasters.

General refinancing is for the loans for broader sectors like infrastructure projects such as hydroelectricity, aviation, manufacturing industries, tourism development, transportation and waste management. Enterprises in agriculture, livestock, fisheries, construction, pharmaceuticals and others are also eligible for this category.

Entrepreneurs seeking the facility should submit the documents including detailed financial reports while the BFIs should verify whether the financial report submitted to the bank matches with the one submitted to the Inland Revenue Offices, debt to equity ratio is as per the NRB standards, whether the business can contribute to the national economy and the refinancing could be repaid in time.

The clients must declare if they had obtained the refinancing facility before.

However, the companies that are declared sick by the bank, have not completed a year’s period after getting out of the sick category, and not fulfilled the minimum capital fund or paid-up capital provisions will not get the facility.

The facility can equally contribute to the revival of the industries affected by the coronavirus pandemic even in the remote areas as the procedure has made it mandatory for the banks that every branch of the bank must include at least five customers from each of its branch.

Likewise, the banks are also directed to make the list inclusive in terms of gender, geography, ethnicity and other parameters.

Published in The Rising Nepal daily on 22 July 2020.