KATHMANDU, Aug 3: Nepal Rastra Bank (NRB) has taken a significant step to support the hydropower sector by offering refinancing for projects that were damaged due to floods.
During a tripartite discussion held on Tuesday in Baluwatar, representatives from the Independent Power Producers' Association, Nepal (IPPAN), Nepal Bankers Association, and NRB discussed the urgent need to address the challenges faced by the flood-affected hydropower projects.
Revised interest rate corridor system introduced
Ganesh Karki, the president of IPPAN, presented the request to NRB for facilitating refinancing, interest capitalization, and loan restructuring for the flood-damaged projects. He stressed the importance of ensuring that banks continue to pay dividends even if the interest of the hydropower project is capitalized. The pressure to repay loans becomes burdensome for projects severely impacted by floods, he said.
Previously, the NRB's directive allowed investment in hydropower projects, allowing interest income to be counted as profit until the production phase. However, distributing dividends was prohibited, and banks faced a reduction in profit due to the requirement of provisioning 12.5 percent of the loan amount while restructuring such loans. This setup discouraged banks from investing in the hydropower sector.
In response to IPPAN's demands, NRB Deputy Governor Bam Bahadur Mishra assured the Association that the central bank is committed to providing refinancing support throughout the reconstruction period for the flood-damaged projects. NRB will also facilitate interest capitalization and loan rescheduling.
However, Mishra also emphasized that promoters should actively contribute to the reconstruction of the flood-damaged projects, not solely relying on the NRB and other banks. He urged promoters to invest additional funds through various options, such as issuing right shares, to share the financial burden. The central bank and other banks will then provide the necessary financial support to complement the promoters' contributions, said Mishra.
