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Company News
Deprived sector lending narrows to 4.39 pc
Wednesday - 28th December, 2011 | www.thehimalayantimes.com |
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Deprived sector is still neglected in financial sector lending. Loans floated in the sector is just 4.39 per cent of the total Rs 723 billion loan floated by the financial institutions in the country.
By the end of the first quarter of the current fiscal year, the financial institutions including commercial banks, development banks, finance companies and microfinance development banks have floated loans worth Rs 31.8 billion to the sector. Financial institutions have lent 4.48 per cent during the same period last year. The deprived sector lending refers to small loans that are lent to poor and rural people for small projects with minimal collateral in order to promote formal banking even among the rural and poor areas.
Commercial banks have lent Rs 18.8 billion, development banks have lent Rs 3.05 billion and finance companies have lent Rs 1.8 billion during the first three months, according to Nepal Rastra Bank (NRB).
Only finance companies fall short of fulfiling the deprived sector lending requirement. Deprived sector lending being more expensive for the financial institutions and less profit generating, financial institutions tend to shy away from lending in this sector.
“To increase the financial access to more rural and deprived sectors, this is NRB’s way to push the financial institutions to venture into needy but less profitable areas,” said Bhaskar Mani Gyanwali, spokesperson for the central bank.
According to the monetary policy, the commercial banks have to lend 3.5 per cent of their total loans to deprived sector while development banks and finance companies’ loan portfolio should contain 3 per cent and 2.5 per cent loans issued to deprived sector, according to monetary policy. The amount will be increased by 0.5 percentage point in two successive years.
NRB has allowed the banks and financial institutions to increase the deprived sector lending by 0.25 percentage point by first half of the current fiscal year and subsequently meet the requirement by the end of current fiscal year.
“The provision has also provided respite to the banks and financial institutions that are struggling to meet revised 0.5 percentage point of deprived sector lending requirement,” according to the spokesperson of central bank.
The financial institutions can either lend directly to the target population or sectors or even float the loans via wholesale lending to microfinance institutions.
“The rate of compliance has gone up in the recent times as they can lend the portion to class ‘D’ financial institution who lend to the target group,” he pointed out. Thanks to the provision the numbers of financial institutions that have failed to fulfil deprived sector lending requirement in last few years have gone down substantially.
In last fiscal year, total five financial institutions were penalised for not fulfiling the deprived sector lending obligation. In the fiscal year 2009-10, there were 52 financial institutions that were fined for not issuing loans to the deprived sector according to the central bank guidelines. |
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