Banks told to make deprived sector lending in phase-wise manner

Published On: August 30, 2016 02:10 AM NPT By: Republica  | @RepublicaNepal

KATHMANDU, Aug 30: Nepal Rastra Bank (NRB) has instructed commercial banks to disburse at least two percent of their total loans to the deprived sector directly by themselves.

Issuing a new circular on Monday, the central bank said banks should make 2 percentage points of the five percent lending to the deprived sector by mid-July 2017. Ending the facility of whereby banks could make 5 percent of their deprived sector lending throughout a fiscal year, the central bank made it mandatory for banks to make 1.25 percent lending to deprived sector by mid-September, 1.5 percent by mid-December and 1.75 percent by mid-April 2017.  

By announcing the directed sector lending to the deprived sector, the central bank has said that loans to the low-income family and women, mainly from the socially backward community, people from indigenous, Dalit, people living with disability, marginalized, labors and landless families can be counted under this category.

The loans, up to the limit that the central bank has set, floated to the self-employed micro enterprises that are operated for social and economic uplifting of deprived sector could also be counted as deprived sector lending, according to the circular.

Earlier, unveiling the Monetary Policy for Fiscal Year 2016/17, the central bank had announced that the commercial banks will be required to make 2 percentage points of the 5 percent deprived sector loans directly by themselves, prompting concerns from bankers that such requirement was difficult to meet as commercial banks do not have expertise, mechanisms and network to float such loans.

The banks had so far been disbursing deprived sector loans mainly through microfinance institutions. Executives of the microfinance institutions have also lamented the move, saying that such requirement would dry up their financing source.

Apart from commercial banks, development banks (B class institutions) and finance companies (C class institutions) are also required to float 4.5 percent and 4 percent, respectively, of their loans to the deprived sector.

Meanwhile, the central bank said that the bank and financial institutions (BFIs) now do not need its permit to reopen branch or sub-branch offices that were closed earlier due to security reason. The BFI can inform the central bank within seven days of operation of such closed branches, according to the circular.

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