KATHMANDU: Banks and financial institutions (BFIs) have disbursed agricultural loans worth Rs 432.92 million till the first 11 months of this fiscal under the government’s interest rate subsidy programme.

Introduced through the fiscal budget of 2014-15, the government’s ‘Interest Subsidy for Commercial Agriculture Loans to the Youth’ programme was implemented from October 24 last year after Nepal Rastra Bank — the central regulatory and monetary authority — issued a circular stating commercial banks (class ‘A’ financial institutions) could issue agricultural loans of up to Rs 10 million to a single borrower at an interest rate not exceeding six per cent.

Later, the development banks (class ‘B’ financial institutions) and finance companies (class ‘C’ financial institutions) were also authorised to extend loans under this programme after the amended guideline was implemented on March 15 this year.

Altogether 16 commercial banks and one development bank — NIDC Development Bank — have extended agro loans under this scheme. The total loan amount sanctioned so far stands at Rs 467.92 million.

Average size of loans sanctioned by the BFIs stands at Rs 1.28 million per borrower. Altogether, 366 borrowers have benefited from this scheme.

The state-owned Rastriya Banijya Bank (RBB) was the best performer for sanctioning a total of Rs 127.4 million and already disbursing the sanctioned amount to 159 projects. The number of borrowers seeking loans from RBB is also high compared to other BFIs.

RBB borrowers are getting loans at five per cent interest rate under this scheme, according to its Chief Executive Krishna Prasad Sharma, explaining the reason for farmers flocking to the bank.

The central bank reimburses up to 400 basis points of the subsidised interest rate to the respective BFIs. This means 40 per cent of the interest rate charged by the BFIs is borne by NRB. BFIs, however, claim they have been facing delays in receiving reimbursement from the central bank.

Grand Bank ranked in second position after RBB in terms of amount of loan disbursed. It has released Rs 89.77 million for 12 projects. In terms of number of projects, however, Agricultural Development Bank Ltd (ADBL) has secured the second position with 90 projects. ADBL’s loan under the scheme is to the tune of Rs 61.26 million, ranking it in the third position in terms of loan amount disbursed.

Likewise, NIDC Development Bank has disbursed loans totalling Rs 39.22 million, out of the sanctioned amount of Rs 47.37 million. Likewise, Nepal Investment Bank and Standard Chartered Bank have disbursed significant amounts of loans — Rs 28.22 million and Rs 27 million, respectively. Nepal Bank has released loans worth Rs 19.62 million.

Prabhu Bank has also sanctioned loans worth Rs 16.20 million, however, the bank is yet to release the amount to the borrowers. And rest of the financial institutions have disbursed loans amounting to less than Rs 10 million.

While the guideline has also paved the way for banks to extend loans of over Rs 10 million under the interest subsidy scheme, BFIs first need to take permission from the central bank to extend such credit. However, loans of up to Rs 30 million is allowed for cold storage and does not need the central bank’s approval.

BFIs can maintain a loan portfolio of up to Rs one billion under this scheme and the risk weight on interest amount that banks have to collect from NRB will be nil under this scheme.

BFIs have been told they can extend agro loans to people engaged in farming of vegetables, fruits, medicinal herbs, sugarcane, dairy, mushroom, black cardamom and ginger, wheat, buckwheat and perilla seeds, bee keeping as well as those involved in floriculture, livestock development and slaughterhouse operation at a commercial scale.

Likewise, high quality seeds production, processing and distribution of agricultural products at commercial scale are also eligible to borrow from BFIs under the subsidised interest rate programme.