Bankers against promoters’ decision to cut credit rate

Kathmandu, April 23

Nepal Bankers’ Association (NBA) — the umbrella organisation representing 27 commercial banks of the country — has said that banks are not in a position to implement the decisions made by the promoters of the financial institutions a few days back.

The Confederation of Banks and Financial Institutions (CBFIN) — the umbrella organisation of the chairpersons and directors of banks and financial institutions — on Monday had announced different relief packages for businesses hit by the coronavirus, including reduction in interest rate on loans by one percentage point.

However, the NBA meeting which was held today concluded that banks will be unable to execute the decisions made by the promoters citing that they are not realistic and were brought without consulting the bankers.

“We discussed each and every decision made by the promoters that were intended to provide relief to the public and businesses due to the ongoing crisis. Though bankers have due respect to decisions made by promoters, we concluded that those decisions cannot be implemented,” said Bhuvan Dahal, president of NBA.

As per bankers, Nepal Rastra Bank (NRB) is expected to introduce additional relief package for businesses severely hit by the coronavirus and direct banks to implement different new provisions soon.

“In such a context, banks should comply with the direction of the central bank on different issues, including the interest rate. Implementing both the directive of the central bank and the decision of promoters will be difficult for bankers,” said Dahal.

The NRB is conducting an assessment on the impact of the coronavirus on businesses. Once the assessment is completed, the central bank is expected to introduce second phase of relief package which banks will be compelled to implement. As bankers had already decided to reduce interest rate on loans from mid-May, they said that the decision made by the promoters to cut interest rate was not necessary.

Similarly, NBA also concluded that bankers are not in a position to implement different other decisions made by the promoters.

The CBFIN had also decided to provide 10 per cent interest subsidy to all the regular borrowers for all types of loans who had paid their instalments by midApril. A decision was also taken to significantly reduce regular expenditures/operational expenses of financial institutions in joint coordination with related institutions.

A version of this article appears in e-paper on April 24, 2020 of The Himalayan Times.