Kathmandu. The concessional loan program that was stalled for more than two years has resumed. The loan flow has resumed, which was stopped informally for a long time due to non-payment of interest by the government.
Earlier, the banks had stopped issuing concessional loans informally after the government failed to pay the interest. The Nepal Rastra Bank (NRB) had also tacitly agreed to stop the program when the government did not make the payment. However, the government has finally decided to resume concessional loans amid the damage caused to government and private property during the Genji agitation and the increasing pressure from businessmen and entrepreneurs.
According to bankers, the program has been restarted after the interim government cleared the outstanding interest. Bankers say that banks will be attracted to concessional loans again in the current situation where there is no demand for loans in other sectors. A banker said, “Now the concessional loan has gone ahead. All banks are attracted to this. This makes it easier for both the borrower and the bank.
The programme has been restarted after the government started the programme by clearing the outstanding interest of around Rs 10 billion. According to the Nepal Rastra Bank’s data, Rs 76.52 billion is yet to be collected as of mid-July of the current fiscal year. As of the first week of September, the government has paid about Rs 9.80 billion in interest and is yet to pay around Rs 3 billion.
The new procedure has abolished the old Concessional Credit Procedure 2075 and implemented the Concessional Interest Grant Procedure 2082. The new provision retains some of the loan headings but refins the interest rate and the form of subsidy. Now the banks will increase the base rate plus 1. They will be able to take 5 percent premium. Earlier, the interest subsidy was reduced to 3 percent from 5 percent. The loan tenure has been fixed at 5 years. In this way, the government seems to be trying to reduce the burden of subsidies and provide certain facilities to the banks and prevent misuse.
Arrangements have been made to provide loans to various targeted groups as per the procedure. Farmers and livestock entrepreneurs will be provided up to Rs 50 million, women entrepreneurs up to Rs 2.5 million, foreign employment returnees up to Rs 2 million and educated youths up to Rs 2 million to operate the project. Likewise, the government has proposed a loan of up to Rs 2.0 million for the Dalit community, up to Rs 2.5 million for a startup, up to Rs 5 million for boiler replacement and up to Rs 500,000 for the construction of houses for natural disaster victims.
The government had suspended the programme two years ago citing the increase in misuse of subsidized loans. But now the private sector has seen positive signs as the arrears are being paid and the new work procedure is being resumed.
Doubt about not being used properly
As the borrowers do not repay the loan on time, the banks have also tightened the lending, but there is doubt about how the concessional loan will move forward. Experts also say that although they have taken advantage of the concessional loan through the operation of the farm, they have invested in land and not in business as per the agreement.
They are of the view that the importance and usefulness of the concessional loan will increase if the banks can move ahead by continuously monitoring and controlling whether the loan has been utilized properly or not. For this, experts insist that the central bank should also bring strict policies and the banks should also monitor and control responsibly. They are of the view that if concessional loans are distributed by making all sides active, it will give good results to the economy.
