The new move comes at a right time for the officials of Nepal Finance Companies Association (NFCA), who have been pleading the central bank to introduce more convenient mechanism for refinancing, immediately after it introduced special refinancing about three weeks ago.[break]
Some financial institutions, including the Capital Merchant Banking and Finance that recently closed operation, were also seeking assistance from the central bank.
According to the new provision, BFIs of category A, B and C can lend to each other for a maximum period of six months against collateral of fixed assets and remortgage of collateral pledged while issuing loan.
“These two new windows are especially for those BFIs that are facing corporate governance problem,” an official of NRB told Republica.
The official said it was not practical for the central bank to help and take action against BFIs at the same time. “That´s why we´ve allowed BFIs to lend in such cases because some BFIs have adequate liquidity and are in a position to help others,” the official added.
NRB Spokesperson Bhaksar Mani Gyawali said any BFIs could use the newly introduced two new windows with some conditions.
“The condition is that the borrowed amount should be used to pay only the depositors,” he said.
Besides, BFIs will not be able to issue loan without clearing the amount taken as loan from other BFIs. Such loans have to be cleared by mid-July, 2013.
The central bank had introduced the special refinancing policy about three weeks ago to resolve the problem of liquidity crisis. However, officials of NFC had been lobbying for easier window, saying that the special refinance policy and lender of last resort was targeted only for financial institutions of A category.
Under special refinancing, BFIs can borrow up to 80 percent of good loans and also receive refinancing facility up to 60 percent of their core capital to manage liquidity.
Gyawali said over a dozen BFIs have already received refinancing, while some more are in the process of getting refinance.
NRB to take action against CMBF
KATHMANDU (REPUBLICA): Despite strict instruction of the central bank, all the branches of Capital Merchant Banking and Finance (CMBF), including the Battisputali-based head office, failed to resume operation even on Monday.
Although all the branches remained open on the day, the management returned the depositors empty-handed.
Spokesperson of NRB, Bhaskar Mani Gyawali, said the central bank was preparing to take action against officials of CMBF for defying its instructions. “We will take action as per the existing laws,” he said.
Meanwhile, Deepak Raj Sharma, CEO of CMBF, has expressed commitment to resume operation from Wednesday. He told Republica that they were trying to inject enough liquidity through recovery of the loan amount to pay the depositors at the earliest.
Related story
Revised interest rate corridor system introduced
