Nepal | July 12, 2020

Govt to give interest rate subsidy

Himalayan News Service
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Kathmandu, January 11

Good borrowers related to the productive sector whose businesses have been dampened due to the border-blockade will get subsidy on interest rates for the first six months of the current fiscal year.

As per guideline prepared by the Ministry of Finance for the operation of the Economic Revival Fund, such borrowers will get interest rate subsidy at four percentage points for loans of up to Rs 100 million and two percentage points for loans exceeding Rs 100 million.

To obtain this facility, the transaction volume of the concerned business must be lower than 50 per cent in the six months of this fiscal as compared to the corresponding period of the last fiscal.

Once Nepal Rastra Bank (NRB) issues a circular to this effect, banks and financial institutions (BFIs) will have to call for applications from the borrowers who are eligible to get this facility within 15 days. Likewise, the subsidy needs to be claimed by the borrower within a month from the date the respective banks and financial institutions issue the notice. The BFIs will get reimbursement of the subsidised amount from NRB.

The government has allocated a fund of Rs 100 billion to provide interest rate subsidy and refinancing facility for the borrowers affected by the earthquakes of April and May. Refinancing facility is also for the productive sector only.

As per Krishna Prasad Devkota, joint secretary at Financial Sector Management Division of Ministry of Finance, expenses on interest rate subsidy will hover at Rs 10 billion.

Similarly, for revival of businesses hit hard by the quakes, NRB will extend refinancing facility at a subsidised rate for two years. BFIs can obtain refinancing loans at an interest rate of 1.5 per cent from NRB and BFIs cannot charge more than five per cent from the borrowers under this scheme.

Borrowers can get cent per cent refinancing for loans of up to Rs 50 million and 20 per cent for the amount exceeding Rs 50 million, as per the guideline.

If borrowers have been affected by the earthquakes and the border-blockade then they will be eligible to obtain both the interest rate subsidy and refinancing facility. To obtain credit under refinancing facility, borrowers will have to submit the evidence of loss certified by the District Natural Disaster Rescue Committee.

Borrowers, who have obtained or are going to obtain claims of the losses from insurance companies, will get refinancing facility for the amount covered by insurance. BFIs will obtain the reimbursement of the loans issued under refinancing facility and amount of subsidised interest on a trimester basis, as per the guideline.

A version of this article appears in print on January 12, 2016 of The Himalayan Times.

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