Photo Courtesy: dcgf.gov.np

February 13: Deprived sector lending of banks and financial institutions (BFIs) have reached around Rs 350 billion. Revised data show that the loan flow to the deprived sector is more than the minimum requirement set by Nepal Rastra Bank (NRB). The data were revised after the central bank changed the method of calculating the loan flow to the deprived sector.

According to the NRB, the banks and financial institutions have disbursed Rs 343 billion loan to the deprived sector as of mid-January of the current fiscal year. Out of the total loans of Rs 4.66 trillion disbursed by banks during this period, the share of loans disbursed to the deprived sector stands at 7.36 percent. 

In the corresponding period of the last fiscal year, banks had disbursed loans amounting to Rs 243.27 billion or 6.64 percent of the total loans to the deprived sector. During the review period, deprived sector lending has increased by 17.1 percent compared to in the corresponding period of last fiscal year. As per the NRB directive, banks are required to disburse at least 5 percent of their total loan (including purchase of bills and discounts) to the deprived sector.  

Since last year, the NRB has included certain types of loans that receive government’s grant on interest as deprived sector lending. Such loans include up to Rs 1 million for commercial agriculture and livestock farming, up to Rs 1.5 million for women entrepreneurship and other concessional loans, loan of up to Rs 1.5 million to the agriculture, industry and up to Rs 1 million to the small and cottage industries.  

Similarly, loans of up to Rs 1.5 million for self-employment of persons who have lost their jobs in the tourism sector due to COVID-19, loans of up to Rs 2.5 million to buy means of transportation for self-employment, and up to Rs 2 million for women entrepreneurs are also categorized as the loans for deprived sector. 

NRB has defined women from low income and socially backward families, indigenous people, Dalits, people with disability, marginalized communities and small farmers, laborers and landless as people from the deprived class. 

Banks and financial institutions themselves have been disbursing loans to the poor directly and indirectly through microfinance institutions. However, in recent times, it has been criticized that the loans of the poor class are being used by the upper class. 

There is a provision that if the banks do not disburse the minimum amount of loan set by the central bank to the poor, they will have to pay fine equal to the maximum interest on the amount that has not been disbursed to the targeted groups.