Nepal Rastra Bank has reduced the maximum limit of refinancing loans that businesses can take from refinancing facility through banks and financial institutions to Rs 50 million per individual/business
Nepal Rastra Bank has reduced the maximum limit of refinancing loans that businesses can take from refinancing facility through banks and financial institutions to Rs 50 million per individual/business.
Releasing the Refinancing Guidelines yesterday, the central bank lowered this facility to businesses/ individuals from Rs 500 million earlier to ensure that more businesses have access to the subsidised loan facility to cope with the impact of coronavirus pandemic. This means that businesses/individuals can now take up to Rs 50 million refinancing loans from BFIs at low interest rate of up to five per cent.
Initially, NRB had prepared a draft of the Refinancing Guidelines and brought down the limit of refinancing loan for individual/businesses to Rs 100 million. However, the central bank has now further reduced the limit to Rs 50 million to ensure access to maximum number of businesses/people to such loans. “The provision that compels every bank branch to release at least five subsidised loans and bring down the limit of such loan to borrowers will certainly help more borrowers to access the refinancing loan facility,” said Gunakar Bhatta, spokesperson for NRB.
However, the guidelines state that businesses can get up to Rs 200 million refinancing loan at five per cent interest rate from NRB’s refinancing fund.
Refinancing loan that businesses acquire from BFIs and NRB will have maximum maturity period of one year and such loan will not be renewed.
The guidelines add that BFIs should give COV- ID-affected businesses top priority when issuing such loans, while people with low income and those from marginalised sections should also be given priority.
Small and medium enterprises, industries that use domestic raw materials and those contributing to substitute import should also be considered while disbursing such loans.
Guidelines say NRB can float up to Rs 200 billion refinancing loan in the market as per necessity.
Though NRB itself had been mobilising refinancing fund, the guidelines state that 70 per cent resources of the refinancing fund will be mobilised through BFIs.
The new provision bars firms recording return on equity of more than 20 per cent annually from such refinancing loan facility. Industries related to tobacco and liquor have also been barred from such refinancing loan facility from NRB and BFIs.