NRB cuts list of districts with low BFI outreach

KATHMANDU, OCT 16 -

The Nepal Rastra Bank ( NRB ) has shortened the list of districts having ‘low outreach of banks and financial institutions (BFIs)’ to 17 from earlier 30.

The new list includes Bhojpur, Khotang, Okhaldhunga, Rasuwa, Manang, Rolpa, Rukum, Salyan, Jumla, Mugu, Humla, Kalikot, Dolpa, Jajarkot, Bajhang and Darchula.

As per the NRB directive, BFIs can open branches in the Kathmandu valley only after opening a branch in one of these specified districts and another in a district outside the Kathmandu valley.

BFIs, while opening their branch in these districts, get an interest-free loan of Rs 5 million from NRB . If they set up the branch in places other than the district headquarters, they will receive Rs 10 million.

The central bank introduced this provision for 30 districts in December 2010 in a bid to increase the financial outreach to rural areas.

A NRB official said the list was revised after the banking outreach in 13 districts increased satisfactorily. “The central bank’s incentive worked really well in increasing the banking outreach in the 13 districts,” said NRB Spokesperson Bhasker Mani Gnawali.

In the last 22 months since the provision was introduced, NRB has extended such interest-free loans worth around Rs 300 million to BFIs for opening branches in those districts.

Gnawali added that NRB would now concentrate on increasing the financial outreach in the remaining 17 districts. He, however, said the regulator had no immediate plans to increase the existing incentives. “Nevertheless, if a BFI applies at NRB to open a branch in those areas, they will be approved instantly,” he said.

NRB ’s same circular has also barred BFIs from opening subsidiary microfinance companies of category ‘D’. The circular states NRB will not issue license to such a subsidiary henceforth. “However, if they apply to open such subsidiaries in the pre-specified nine districts — Manang, Humla, Dolpa, Kalikot, Mugu, Jajarkot, Bajhang, Bajura and Darchula — they will be awarded the license,” said Gnawali.

NRB has also allowed microfinance companies operating in the aforementioned nine districts to collect deposits. Generally, microfinance companies in Nepal are not allowed to collect deposits from the public and they have to rely on wholesale lending by other financial intermediaries to issue micro loans.

Source: The Kathmandu Post