AIC exempted from Single Obligor Limit

KATHMANDU, DEC 02 -

The Nepal Rastra Bank (NRB) exempted the Agriculture Inputs Company (AIC) from Single Obligor Limit (SoL) which will enable it to open letters of credit from a single bank to import chemical fertilisers, irrespective of the size of the import.

SOL is the maximum limit that BFIs can lend to a single sector and provide bank guarantee.

Currently, SoL is 25 percent of the core capital for most of the sectors, while it is 30 percent for a few productive sectors such as export industry, cottage and small industries, pharmaceutical industry, agriculture, tourism and iron and steel industries.

In case of hydropower projects and transmission lines, SoL is 50 percent, provided power purchase agreement has already been signed. Other two stated owned enterprises—Nepal Oil Corporation and Nepal Food Corporation—were already exempted from SoL.

“We considered the request of the company to help import fertilisers without any delay and deliver them to farmers timely,’ said an NRB official.

AIC, however, could import the required quantity of fertilisers by opening LCs in different banks even if it was not exempted from SoL. The SoL limit for AIC would have been 30 percent, according to a central bank official.

AIC had been exempted from SoL earlier too, but the central bank denied had again imposed the provision after AIC was converted into a company from corporation.

With the government planning to increase fertiliser imports this time with higher budget allocation, the central bank easing SoL so that AIC will not have to rush to different banks for opening LCs.

For the first time, the central bank has also fixed areas of business es for all three public enterprises given SoL exemption.

As per the directive, AIC can get this concession only while doing business related to chemical fertilisers, while the Nepal Oil Corporation gets this facility while doing business related to petroleum.

SOL is applicable in fixed deposit receipts, government’s securities and bank guarantees provided by international institutions such as World Bank and Asian Development Bank in which Nepal is also a member state and highly-rated international banks.

Source: The Kathmandu Post