Finance minister asks JV banks to bring in capital

Kathmandu, June 7

The foreign joint venture banks operating in the country have been asked to bring in capital from their partner banks for smooth flow of credit in the economy.

Even after Nepal Rastra Bank (NRB) has allowed the banks to bring loans from foreign banks to invest in infrastructure and productive sectors, the banks are not making an effort to bring capital from foreign banks.

Banks, on the other hand, have been saying that ‘sovereign rating’ is a prerequisite to borrow from foreign banks.

Against this backdrop, Finance Minister Yubaraj Khatiwada has urged joint venture banks, namely Everest Bank, Nepal SBI Bank, Himalayan Bank and Nepal Bangladesh Bank to borrow from their partner banks. “As we have opened up the borrowing facility from foreign banks to meet the requirement of financing in our economy, we should not delay utilising this facility,” said Finance Minister Khatiwada.

However, the joint venture banks have pointed at the risks of fluctuation of the US dollar vis-à-vis Nepali currency and talked about possibility of borrowing in Indian currency.

Nepal SBI Bank has put forward a proposal to borrow in Indian currency and cater to all the banks. However, the central bank has not responded to the proposal.

Ashoke Shumsher Rana, CEO of Himalayan Bank — a joint venture with Habib Bank Pakistan — said that the hedging cost of the greenback is high. However, the central bank has asked banks to borrow to lend to specified sectors by adding three per cent to the London Interbank Offered Rate (LIBOR). “Banks cannot take risks of loss from the fluctuation of the dollar as such loans are long-term and if banks have to hedge, then another six per cent rate will have to be added, due to which lending in the productive sector will not be efficient.”