Nepal | August 04, 2020

Nepal Rastra Bank plans to refinance all 753 local bodies

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Nepal Rastra Bank (NRB) is preparing to refinance all the 753 local bodies through the upcoming Monetary Policy. It is preparing to do so with an aim to uplift the economy which has been hammered by the coronavirus contagion.

Speaking at the Finance Committee under the Federal Parliament today, NRB Governor Maha Prasad Adhikari mentioned that providing such loans to the local levels will increase employment opportunities. He said that it would also help boost self-employment and economic activities at the local level. “The local level should be the base of the economy and a policy is being prepared accordingly,” he further stated.

Adhikari clarified that a total of only 37 people received Rs seven billion out of the refinance facility provided in the previous year.

“Now we have introduced a law that makes it mandatory for each branch of any bank to give loans to a minimum of five people,” he said.

A provision will be made in the Monetary Policy for institutions to get such loans at up to three per cent interest and businesses run by women can avail them at five per cent interest rate, he informed.

Governor Adhikari also stated that such loans can go up to Rs 200 billion in the next fiscal year. During the meeting, he also informed the committee members that the refinancing system will remain in place as long as the coronavirus effect remains.

“If a person comes to the market with an innovative and saleable business idea but a bank refuses to provide loans then the central bank will look into the issue,” he said. Adhikari stated that the central bank is serious about effectively implementing the refinancing facility as it will increase employment at the local level.

Adhikari added that NRB has also held discussions with the Securities Board of Nepal, Nepal Stock Exchange and banks and financial institutions regarding the Monetary Policy. “We will make sure that banks and financial institutions are not affected, but at the same time we will try to address the current issues in the market,” he said.

Stating that the demand for loans will increase next year, he also expressed confidence that the government’s target of seven per cent economic growth will be achieved.

Adhikari also informed that NRB is planning to take Agricultural Development Bank forward by making agricultural credit its top priority. Similarly, for the development of small and medium enterprises, the idea of handing over the responsibility of providing industrial loans to a single bank has also been discussed, he said.

He also mentioned that necessary arrangements can be made to limit interest rate to single digit.

“Reducing interest rates should not be a problem for depositors too. Entrepreneurs can and should manage things if interest rates are maintained at single-digit figures,” he said.

A version of this article appears in e-paper on July 14, 2020, of The Himalayan Times.

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