NRB Bars Banks From Auctioning Off Debtors’ Collateral

 Kathmandu, Dec. 3

Nepal Rastra Bank has barred the banks and financial institutions (BFIs) from auctioning off the collateral of the debtors affected by the COVID-19 pandemic.

"Auction of collateral should not be an option if any debtor has not paid the capital and interest of the loan for less than six months period," said Dr. Gunakar Bhatta, Spokesperson and Executive Director of the NRB at a programme organised by the central bank to publish the review of the Monetary Policy of Fiscal Year 2020/21.

He also said that there should be more than 5 per cent difference between the interest of fixed deposit and other deposits, except for call deposit. The central bank's objective is to promote social welfare through its monetary policy and instruments, he maintained.
Addressing the programme, NRB Governor Maha Prasad Adhikari said that the extension of loan's capital and interest repayment would impact the bank's profits but urged them to be patient.

"Restructuring, rescheduling and swapping of the loans will certainly impact its quality but the BFIs need not be worried about their shrinking profits. However, provisioning liability would be certainly increased," he said.

The central bank has approved the refinancing loan of about Rs. 52 billion following its announcement of the provision in the monetary policy.

Likewise, it had received individual application for Rs. 56 billion refinancing of which Rs. 16 billion has been approved.

"The central bank has mobilised more than Rs. 66 billion for refinancing purpose, and 41,000 clients from across the country have been benefitted from the facility. We are mapping the implementation of the programme in order to find out if any local body is missed from the benefits of the policy," said Adhikari.

Likewise, 41,618 creditors have been benefitted from the Rs. 72 billion government fund created for the rehabilitation of business and economic activities.

According to the central bank, there is sufficient liquidity and enough reserves of foreign currency.

Adhikari said that having more liquidity meant that the country was in comfort zone although there should be some compromise in terms of managing it now. The BFIs have mobilised Rs. 219 billion in deposits and Rs. 202 billion in loans in the current fiscal year.
He stressed that the financial policy should be accommodative in the context of the coronavirus crisis.

"We must promote economic activities in order to create jobs and promote growth. 2021's outlook is better than earlier expected and success in developing vaccine has further raised hopes," said the governor.

Interest rates of loan has gone down which has resulted in increased confidence in business community, he said with a note that lower interest rate has troubled the depositors.

Similarly, debtors who obtained loan in foreign currencies can repay its instalment in Nepali currency due to the impacts of the pandemic. The central bank is also planning to further facilitate the refinancing to the highly affected sectors like tourism, hotel and animal husbandry.  

Published in The Rising Nepal daily on 4 December 2020.