Nepal Rastra Bank ( NRB ) has ordered development
banks and finance companies to raise the level of their lending to the
productive sector to 15 percent and 10 percent respectively by mid-2016.
The productive sector includes agriculture, energy, tourism and small
and cottage industries.
Central Bank Spokesperson Bhaskarmani Gnawali said that this was a first for development banks and finance companies. In the past, only commercial banks were required to ensure that a certain percentage of their credit issue went to the productive sector.
“The provision of compulsory lending to the productive sector was made to ensure sustainable investment in the productive sector so that it would create employment opportunities within the country and aid poverty alleviation,” he said. “A stringent policy on branch expansion was made in order to stop overbanking in urban areas,” added Gnawali.
Meanwhile, B and C class financial institutions have been ordered to prepare annual action plans to implement the directive and set half-yearly targets in a way that can be monitored.
The boards of these institutions have also been told to review whether lending has been made as per the annual action plan every six months. They have to submit their review reports to the concerned supervision department of NRB within one month of the end of the half-year.
The directive issued to development banks and finance companies is in line with the monetary policy for the current fiscal year which has talked about asking them to prepare action plans to increase their lending to the productive sector within the next three years.
NRB has already directed commercial banks to increase their lending to the productive sector to 20 percent by mid-July 2015. The central bank has also increased the required level of lending to agriculture and energy to 12 percent from the earlier 10 percent for commercial banks.
However, A class banks have to maintain their lending to these two sectors at 10 percent within the current fiscal year, according to the latest NRB directive. The central bank has also defined agriculture sector loan, energy loan, tourism sector loan, cottage and small industry loan which have been categorized as productive sector loans.
Agriculture lending includes credit that goes to sectors such as cash crops, tea, coffee, tobacco, fruits and floriculture, livestock, bee keeping, fertilizer and pesticide enterprises, cold stores, irrigation and fishery, among others.
Likewise, lending to the energy sector includes credit issued to hydropower and renewable energy projects. The tourism sector covers trekking, travel agencies, mountaineering, rafting, camping, resorts, hotels and recreational activities. Cottage and small industries refers to industries having a fixed capital of up to Rs 30 million.
Meanwhile, the central bank has also changed the provisions regarding establishment of new bank branches or head offices in the Kathmandu valley. Henceforth, banks and financial institutions (BFIs) will have to open three branches outside the valley before they will be allowed to open one branch in the valley. Earlier, they were allowed to set up branches in the valley after opening two branches elsewhere in the country.
Among the three branches required to be opened outside the valley, one branch must be established in one of the 14 districts identified by NRB as having a very low presence of banks and other financial institutions. These districts are Bhojpur, Okhaldhunga, Manang, Rukum, Salyan, Jumla, Mugu, Humla, Kalikot, Dolpa, Jajarkot, Bajhang, Bajura and Darchula. Previously, this list contained 17 districts.
Similarly, of the two remaining branches, at least one should be located outside the perimeter of district headquarters or municipalities.
Meanwhile, NRB has also told BFIs that they can provide loans worth up to Rs 1 million to productive agrarian enterprises related to coffee, oranges and tea besides animal husbandry and milk production firms against project collateral.
Likewise, the central bank has allowed BFIs to categorize defaulted loans to cement factories as good loans if they are rescheduled or restructured. Earlier, this facility was provided to loans that went to hydropower, cable cars and other national priority infrastructure projects.
Meanwhile, micro-finance institutions (MFIs) not using borrowed funds from other BFIs to issue loans to targeted populations will be fined on the basis of the existing bank rate fixed by the central bank on a quarterly basis. The monetary policy has kept the bank rate at 8 percent. The amount of the fine will be calculated against the lower remaining credit amount of the previous and latest quarters.
source: the kathmandu post,19 Oct 2013
LINK
Central Bank Spokesperson Bhaskarmani Gnawali said that this was a first for development banks and finance companies. In the past, only commercial banks were required to ensure that a certain percentage of their credit issue went to the productive sector.
“The provision of compulsory lending to the productive sector was made to ensure sustainable investment in the productive sector so that it would create employment opportunities within the country and aid poverty alleviation,” he said. “A stringent policy on branch expansion was made in order to stop overbanking in urban areas,” added Gnawali.
Meanwhile, B and C class financial institutions have been ordered to prepare annual action plans to implement the directive and set half-yearly targets in a way that can be monitored.
The boards of these institutions have also been told to review whether lending has been made as per the annual action plan every six months. They have to submit their review reports to the concerned supervision department of NRB within one month of the end of the half-year.
The directive issued to development banks and finance companies is in line with the monetary policy for the current fiscal year which has talked about asking them to prepare action plans to increase their lending to the productive sector within the next three years.
NRB has already directed commercial banks to increase their lending to the productive sector to 20 percent by mid-July 2015. The central bank has also increased the required level of lending to agriculture and energy to 12 percent from the earlier 10 percent for commercial banks.
However, A class banks have to maintain their lending to these two sectors at 10 percent within the current fiscal year, according to the latest NRB directive. The central bank has also defined agriculture sector loan, energy loan, tourism sector loan, cottage and small industry loan which have been categorized as productive sector loans.
Agriculture lending includes credit that goes to sectors such as cash crops, tea, coffee, tobacco, fruits and floriculture, livestock, bee keeping, fertilizer and pesticide enterprises, cold stores, irrigation and fishery, among others.
Likewise, lending to the energy sector includes credit issued to hydropower and renewable energy projects. The tourism sector covers trekking, travel agencies, mountaineering, rafting, camping, resorts, hotels and recreational activities. Cottage and small industries refers to industries having a fixed capital of up to Rs 30 million.
Meanwhile, the central bank has also changed the provisions regarding establishment of new bank branches or head offices in the Kathmandu valley. Henceforth, banks and financial institutions (BFIs) will have to open three branches outside the valley before they will be allowed to open one branch in the valley. Earlier, they were allowed to set up branches in the valley after opening two branches elsewhere in the country.
Among the three branches required to be opened outside the valley, one branch must be established in one of the 14 districts identified by NRB as having a very low presence of banks and other financial institutions. These districts are Bhojpur, Okhaldhunga, Manang, Rukum, Salyan, Jumla, Mugu, Humla, Kalikot, Dolpa, Jajarkot, Bajhang, Bajura and Darchula. Previously, this list contained 17 districts.
Similarly, of the two remaining branches, at least one should be located outside the perimeter of district headquarters or municipalities.
Meanwhile, NRB has also told BFIs that they can provide loans worth up to Rs 1 million to productive agrarian enterprises related to coffee, oranges and tea besides animal husbandry and milk production firms against project collateral.
Likewise, the central bank has allowed BFIs to categorize defaulted loans to cement factories as good loans if they are rescheduled or restructured. Earlier, this facility was provided to loans that went to hydropower, cable cars and other national priority infrastructure projects.
Meanwhile, micro-finance institutions (MFIs) not using borrowed funds from other BFIs to issue loans to targeted populations will be fined on the basis of the existing bank rate fixed by the central bank on a quarterly basis. The monetary policy has kept the bank rate at 8 percent. The amount of the fine will be calculated against the lower remaining credit amount of the previous and latest quarters.
source: the kathmandu post,19 Oct 2013
LINK
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