BFIs’ lending to energy sector on the rise: Governor

Yuba-Raj-KhatiwadaTANAHUN, MAR 02 – Nepal Rastra Bank (NRB) Governor Yubaraj Khatiwada has said there is a growing trend of banks and financial institutions (BFIs) investing in the energy sector.

“As a result, BFIs’ credit to the sector currently accounts for 3-4 percent of their total lending, which was less than 1 percent until few years ago,” said Khatiwada, inaugurating Kaski Finance Company’s branch here on Sunday.

NRB has directed commercial banks to increase their lending to agriculture and hydropower sectors to 12 percent of their total lending at the end of the current fiscal year.

As lending to the hydropower sector takes place gradually as it takes a relatively longer period to complete a project, the central bank has provisioned that even the committed amount could be counted as loans.

“There has been a huge commitment from banks to the energy sector,” said Khatiwada. “There is no the shortage of resources for small- and medium-scale hydropower projects.”

He said there has also been a rise in investment to the agriculture sector. “The investment stood at Rs 16 billion five years ago, which has now reached Rs 60 billion,” he said. “I want the agriculture sector to get lending of Rs 150 billion.” In the past, many people opened financial institutions to make quick money, but the situation has now changed, he said, adding BFIs would not invest in real estate and stock market haphazardly. “If they make the same mistake, nobody will spare them,” he said.

If the banks follow NRB’s directive on lending, they could be competitive in the market, according to Khatiwada. With his tenure ending in less than a month, Khatiwada said the new governor should continue reforms he initiated.

Source : The Kathmandu Post