Bankers seek liberal definition of ‘productive sector’

Kathmandu, June 13

Bankers have sought liberal definition of ‘productive sector’ through Monetary Policy 2018-19 and said that the Nepal Rastra Bank (NRB) should include every production unit in the new definition.

Presenting suggestions to NRB — the national regulatory and monetary authority — Nepal Bankers’ Association (NBA) asked the central bank to develop a negative list of sectors that do not fall in the productive sector.

Citing that banks are expanding their branches to the local bodies as per the government’s policy, NBA — the umbrella body of class ‘A’ banks — urged the central bank to include a provision in the monetary policy allowing commercial loans provided to the local bodies to be calculated as productive sector lending.

Similarly, banks have sought relaxation in calculation of credit-to-core capital plus deposit (CCD) ratio. NBA has requested for a provision to allow banks to deduct 50 per cent of loan issued to the productive sector while calculating the CCD ratio.

Banks are allowed to issue only 80 per cent of the deposit and core capital as loan.

NBA has suggested bringing down the cash reserve ratio to five per cent and removing the provision of CCD ratio.

Bankers have asked for expansion of refinancing facility of the central bank.

Currently, the central bank has a refinancing window of only Rs 20 billion. Banks have utilised the refinancing facility of Rs 16.47 billion in the first 10 months of this fiscal despite the credit crunch.

Bankers said that the refinancing facility has not been utilised fully because the facility is available only for limited sectors.

Similarly, NBA has suggested for longer term renewal facility for the refinancing facility extended to the earthquake victims to achieve the targeted goals under this scheme.

Bankers have asked for the relaxation period to be extended by one year to meet the regulatory requirements of agricultural loans. Banks have to extend 10 per cent of their total loan portfolio in agriculture sector. NBA has been lobbying to incorporate the loan extended in agro processing industry as agro loan.

Likewise, the bankers have suggested removal of 15 per cent threshold in overdraft loan citing the provision has been adversely affecting import firms. They have suggested 15 per cent threshold in personal loans, but that there should not be any cap for business overdraft.

In view of the loanable fund crisis, bankers have suggested that the central bank should be liberal towards banks to obtain institutional deposits. Banks can obtain only 50 per cent as institutional deposits.