NRB provides Rs 570m refinancing

Out of dozen banks and financial institutions that had applied for the much-sought after refinancing from the central bank, only two -- Citizens Bank International and Clean Energy Development Bank -- have taken the facility after Nepal Rastra Bank (NRB) eased the provisions.
"The two institutions -- Citizens Bank International and Clean Energy Development -- took Rs 570 million under the refinancing facility," said Gopal Kafle, spokesperson of the central bank. "Citizen Bank took Rs 430 million whereas Clean Energy Development Bank took Rs 140 million under refinancing facility," he said adding that apart from Himchuli Bikas Bank and Annapurna Finance, the remaining applicants are commercial banks that had asked the central bank to provide refinancing facility due to liquidity crunch.
Meanwhile, finance companies were not much attracted to the facility as only one finance company has applied for the facility.
The mid-term evaluation of the Monetary Policy has introduced refinancing tool to pump in liquidity in the banking system for productive sectors like tourism, hydropower, exports, agriculture, small and medium scale industry and other productive sectors.
The central bank has decided to extend refinance loans up to Rs 25 billion to the banks and financial institutions against collateral of good loans at an annual rate of 7.5 per cent. The financial institutions can charge only up to 10.5 per cent and can get such refinancing facility up to 40 per cent of their primary capital, according to the central bank.
The facility will be provided for six months and could be reviewed if new collaterals of good loans are provided.
Since last October, the market has been witnessing liquidity crunch. Bankers think that the psychological fear of depositors is behind the tight liquidity at present. "It started since last October, when the central bank could not provide cash in the market during the Dashain festival," he said adding that the source of income provision coupled with the political uncertainty has shaken depositors’ confidence from the banking system.
According to the NRB's nine months report, the liquid assets of the commercial banks stood at Rs 170.7 billion as at mid-April 2010. "Of the components of liquid assets, liquid fund declined by 7.8 per cent," said the central bank. "A decline in commercial banks' balance with the NRB as well as balance held abroad accounted for a contraction of liquid funds in commercial banks."