Nepal Rastra Bank (NRB), the central bank, has reduced the interest rate on general refinancing by a percentage point to four per cent, with effect from today, providing banks and financial institutions (BFIs) access to cheaper funds.
The reduction in interest rate, however, is not expected to benefit borrowers, as the rate at which BFIs can extend such loans has remained unchanged at nine per cent.
Under the refinancing facility, BFIs are allowed to acquire funds from the central bank at a cheaper rate. BFIs then have to extend these funds to borrowers in the form of loans but cannot charge more than the rate fixed by the central bank. Also, such loans should be strictly provided on the collateral of good loans, except in the case of sick industries, and the credit should be fully paid within six months of issuance of loans.
Today’s revision means BFIs can acquire funds for general refinancing from the central bank at four per cent interest from five per cent of the past. But since the central bank has not made any change to the rate at which BFIs can resell those funds — which stands at nine per cent — borrowers are not expected to benefit a lot.
“We are fully aware of this situation, but we believe rate reduction will encourage BFIs to expand credit to productive sectors, especially agriculture,” NRB Deputy Governor Maha Prasad Adhikari said.
Under the general refinancing facility, BFIs can extend loans to hydropower project developers, agricultural sector, livestock, poultry and fishery businesses, industries operated by foreign employment returnees, manufacturing and tourism industries, and build physical infrastructure like roads, bridges, ropeways, trolley buses, tunnels, cable cars and electricity transmission lines, among others, says an NRB directive issued today. However, such funds cannot be provided to alcohol and tobacco manufacturing industries.
NRB has classified the refinance credit into four groups: general refinance, special refinance, export refinance and refinance for small and medium enterprises.
Under special and export refinance facilities, NRB extends loans to BFIs at one per cent interest to facilitate firms and companies engaged in export-related businesses, sick industries, small and cottage industries, small industries operated by dalits, indigenous, deprived and marginalised groups, and women, and those seeking credit for the purpose of foreign employment. BFIs cannot charge more than 4.5 per cent interest on such loans.
Similarly, under the refinancing facility for small and medium enterprises, NRB extends loans to BFIs at five per cent interest. BFIs, in turn, can extend such loans on collateral of up to Rs one million of good loans at a maximum of 10 per cent interest.
Highlights
> BFIs can acquire funds for general refinancing from NRB at 4 per cent interest
> BFIs can extend such loans to hydro project developers, agricultural sector, industries operated by foreign employment returnees, manufacturing and tourism industries, and build physical infrastructure, among others
> Such funds cannot be provided to alcohol and tobacco manufacturing industries.
source:the himalayan times,1 august 2014
LINK
The reduction in interest rate, however, is not expected to benefit borrowers, as the rate at which BFIs can extend such loans has remained unchanged at nine per cent.
Under the refinancing facility, BFIs are allowed to acquire funds from the central bank at a cheaper rate. BFIs then have to extend these funds to borrowers in the form of loans but cannot charge more than the rate fixed by the central bank. Also, such loans should be strictly provided on the collateral of good loans, except in the case of sick industries, and the credit should be fully paid within six months of issuance of loans.
Today’s revision means BFIs can acquire funds for general refinancing from the central bank at four per cent interest from five per cent of the past. But since the central bank has not made any change to the rate at which BFIs can resell those funds — which stands at nine per cent — borrowers are not expected to benefit a lot.
“We are fully aware of this situation, but we believe rate reduction will encourage BFIs to expand credit to productive sectors, especially agriculture,” NRB Deputy Governor Maha Prasad Adhikari said.
Under the general refinancing facility, BFIs can extend loans to hydropower project developers, agricultural sector, livestock, poultry and fishery businesses, industries operated by foreign employment returnees, manufacturing and tourism industries, and build physical infrastructure like roads, bridges, ropeways, trolley buses, tunnels, cable cars and electricity transmission lines, among others, says an NRB directive issued today. However, such funds cannot be provided to alcohol and tobacco manufacturing industries.
NRB has classified the refinance credit into four groups: general refinance, special refinance, export refinance and refinance for small and medium enterprises.
Under special and export refinance facilities, NRB extends loans to BFIs at one per cent interest to facilitate firms and companies engaged in export-related businesses, sick industries, small and cottage industries, small industries operated by dalits, indigenous, deprived and marginalised groups, and women, and those seeking credit for the purpose of foreign employment. BFIs cannot charge more than 4.5 per cent interest on such loans.
Similarly, under the refinancing facility for small and medium enterprises, NRB extends loans to BFIs at five per cent interest. BFIs, in turn, can extend such loans on collateral of up to Rs one million of good loans at a maximum of 10 per cent interest.
Highlights
> BFIs can acquire funds for general refinancing from NRB at 4 per cent interest
> BFIs can extend such loans to hydro project developers, agricultural sector, industries operated by foreign employment returnees, manufacturing and tourism industries, and build physical infrastructure, among others
> Such funds cannot be provided to alcohol and tobacco manufacturing industries.
source:the himalayan times,1 august 2014
LINK
Comments
Post a Comment