Central bank directs to lend energy, agro projects

The central bank has spelt out the sectors that will be prioritised under energy heading in order to direct more lending to the sector.
The central bank has revised the category and added energy, hydroelectricity and renewable energies sub categories under the energy heading. Earlier, the loans to energy generation was categorised as electricity and gas or gas pipelines only.
The recategorisation of sectors has come along with the central bank's directives to the commercial banks to float minimum of 10 per cent of their total lending to agriculture and energy sectors.
Those commercial banks that have lent less than 10 per cent in these sectors will have to lend more by the end of fiscal year 2013-14. However, the commercial banks falling short can increase the lending to these prioritised sectors to 10 per cent of the total loans during the end of fiscal year 2011-12 by increasing the loans by two per cent annually.
The sectors recognised as agriculture include crops, crops-related service, tea, coffee, tobacco, jute plants, forestry, irrigation, animal husbandry, poultry and fishery.
Likewise, the sectors recognised for energy loan credit include power generation, hydroelectricity and renewable energy -under the recategorised heading. Last year the central bank had asked the commercial banks to submit a plan on how to increase loans floated to productive sectors to 20 per cent of industrial average by fiscal year 2013-14.
The central bank has recognised sectors like agriculture, energy, tourism and small and medium enterprises as productive sector.It seems to have reverted back to its dictating the lending policies of financial institutions as it did before a couple of decade ago. The banks are shying away from sectors like agro that are in need of financing but are considered less profitable.
"If the banks do not venture into diversified areas and stay cluttered lending to unproductive sectors like real estate, the central bank has no choice but ask them to go into sectors that need financing," pointed out spokesperson for the central bank Bhaskar Mani Gyanwali, adding, "about half of the banks' lending exceed 10 per cent — of the total loan — to agro and energy."
Despite the immense scope in agro and energy sector most of the banks are concentrated on unproductive sectors like real estate, he said, adding that by coaxing them to enter the productive sectors, the central bank is widening their business and increasing the access to finance.
The banks are sitting with Rs 47 billion of loanable fund but are apprehensive to lend to the new projects. The deposits accelerated in the recent times but the growth in loans floated has been arrested.
The central bank, to promote lending to agro, is going to provide refinancing facilities for agriculture at 6.5 per cent interest as it did with hydropower loans. The banks that will obtain the refinance facility to finance the hydro projects cannot charge the projects more than 10 per cent interest, it informed.