The Confederation of Banks and Financial Institutions — the umbrella organisation of the chairpersons and directors of banks and financial institutions — today decided to reduce the interest rate on loans by one percentage point in a bid to provide relief to businesses and the public hit by the coronavirus pandemic.

However, the interest rate discount is applicable only for loans up to Rs 10 million from commercial banks, up to Rs 4 million from development banks and up to Rs 2 million from finance companies, states CBFIN.

“The reduction in interest rate aims at reviving economic activities and helping them sustain in the long run,” said Bhoj Bahadur Shah, vice-president of the confederation.

However, bankers are apprehensive how promoters will implement this decision as they did not hold any consultations with bankers prior to announcing the discount facility.

“We should have been consulted. The interest subsidy and interest rate discount should be provided to needy businesses and sectors that have been hit by the pandemic and not to all. Instead of providing interest discount to all, it would have been better to provide additional discount on interest to those who actually needed it,” said Bhuvan Dahal, president of Nepal Bankers’ Association.

The CBFIN also decided that all banks and financial institutions would provide 10 per cent interest subsidy to all the regular borrowers for all types of loans who had paid their instalments till mid-April. A decision was also taken to significantly reduce regular expenditures/ operational expenses of financial institutions in joint coordination with related institutions.

Meanwhile, CBFIN also decided to form a taskforce to study the impact of COVID-19 and recommend a way forward by developing short-, medium- and long-term strategies to revive the economy and submit them to the government and the central bank.

“Chairpersons of financial institutions have suggested that all private sector organisations and financial institutions work jointly with the government and provide support to revive various sectors of the economy. It is time now for everyone to make some sacrifices and work in unison to resolve the crisis brought about by the COVID-19 pandemic,” reads the press statement issued by CBFIN. The confederation has also suggested that the government not seek the source of income/ KYC requirement/and tax clearance for any deposits of up to Rs 1.5 million citing that such fears have discouraged people from depositing money in financial institutions.

CBFIN has also suggested that the government allow non-resident Nepalis/foreigners, as individuals or entities, to invest up to $500,000 by bringing investment from abroad through merchant banks/capital companies in the stock market. It also suggested that the approval process from the central bank and the Department of Industry be done away with if anyone brings up to Rs 5 million as foreign investment in Nepal through the banking system and the government should facilitate that.

The confederation also suggested that the government not seek the source of income if any NRN brought up to $1 million in Nepal for investment.

source: the himalayan times, 22 april 2020