The rate cut is being pushed as a part of relief programs that Prime Minister Dr Babu Ram Bhattarai unveiled last week. In the relief program, the PM had committed to provide soft loans to underprivileged groups also assuring them of improving their access to financial services.[break]
Under the new directives, which NRB is mulling to enforce at the earliest, BFIs will be required to provide loans to aspirant borrowers from badi, dalit and underprivileged communities along with senior citizens and physically challenged persons at rates lower than the prevailing rates by 1 percentage point.
Although direct intervention on rate by the central bank, which leaves the rates to be decided by the market, goes against its own policy, NRB Spokesperson Bhaskar Mani Gyawali said it was doing so mainly in a bid to implement the government´s program.
“We have already talked about the rate cuts with the bankers. They are positive to implement it as a part of their corporate social responsibility,” Gyawali told Republica.
Likewise, the central bank is also persuading the BFIs to provide loans to people operating micro-enterprises at low interest rates.
“We have left it to the BFIs to decide on the rates at which they will prefer to work with micro-entrepreneurs. Our directives will come as a moral persuasion,” said a source.
The central bank is also asking the BFIs to actively participate in youth self-employment program, under which the government has committed to create jobs for 50,000 youth belonging to rural and low income groups. Under this, the central bank will be reinforcing the government´s call to contribute one-third of total fund that it lends under deprived sector lending to the Youth Self-Employment Fund.
Although it is a three-year old program, only 20 of over 200 BFIs have participated in it so far. Bankers said they have no problem contributing to the fund, provided that the government guarantees their lending will be recovered.
As part of the program, the new directives will seek the BFIs to provide loans to rickshaw-pullers in Tarai districts against the collateral of rickshaw itself. This scheme was first unveiled by Dr Bhattarai in his budget three years ago. It has been incorporated in the new budget as well.
Moreover, the new directives will also ask the BFIs to strictly comply with guidelines on transparency and service charges that it unveiled almost a year ago. Under this, the central bank asks the BFIs to lower service charges, limit the interest rates gap between various saving schemes at 2 percent or less and not to levy any charges without explicitly disclosing them to customers.
It is also instructing the BFIs to help in distribution of new notes, the demand for which soars rapidly in the market, during the festive season.
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