Banks should lend 10% of their total lending to energy sector: PM

KATHMANDU, Feb 24:

Prime Minister Dr Baburam Bhattarai has directed officials to make it mandatory for commercial banks to lend 10 percent of their total lending to the energy sector.

“It´s high time we increased investment in the energy sector," Bhattarai said on Friday during a meeting with officials from National Planning Commission (NPC), Ministry of Finance (MoF) and Nepal Rastra Bank (NRB).

Issuing a directive in January, 2012, Nepal Rastra Bank (NRB), the central monetary authority, asked commercial banks to lend 10 percent of their total credit portfolio to agriculture and energy sectors.

“Now, banks should lend at least 10 percent of their total lending to energy and agriculture sectors each,” PM Bhattarai said in the meeting.

However, NRB officials told the PM that it won´t be appropriate for the central bank to issue new directive to banks for increasing lending in the energy and agriculture sector this time.

NRB has already made it mandatory for banks to make 20 percent of their total lending in the productive sector and 10 percent in agriculture and energy sectors.

As Nepal has adopted open market economy, an NRB official said it would be better if commercial banks themselves increased their investment in energy and agriculture sectors.

According to the latest report of NRB, commercial banks invested Rs 8.28 billion in agriculture sector alone in the first half of 2012/13. This is a rise of 28.8 percent compared to figure of the corresponding period in the last fiscal year. The report reveals that banks have invested a total of Rs 37.08 billion in the agriculture sector so far.

Meanwhile, PM also inquired about the gap between lending and deposit rates of commercial banks. “I have heard that there is a huge difference between lending and deposit rates,” Bhattarai said, asking officials to reduce the difference if they think it´s too high.

Source: Republica