April 4: Banks are struggling to bring loans from foreign banks at a time when the financial system of the country is facing liquidity crunch. Nepal Rastra Bank (NRB) had granted permission to the country’s banks four years ago to acquire loans from abroad.

However, banks have acquired only a minimal amount of loan during this period.

Bankers say it is difficult to acquire loan from foreign banks because the country doesn’t have credit rating and the loan becomes expensive due to the fluctuation in rate of dollar.

“Acquiring loans from foreign banks is a good alternative to resolve the liquidity crisis,” says Vice President of Nepal Bankers’ Association Sunil KC, who is also the CEO of NMB Bank.

“However, foreign banks don’t trust us because we lack country rating,” added KC.

So far, around a dozen banks have sought permission from the central bank to acquire loans worth Rs 30 billion in total from foreign banks. Out of that amount, around Rs 10 billion has already entered the banking system of Nepal.

Around half a dozen BFIs including a microfinance company have acquired foreign loans so far. Majority of those loans were provided by the International Finance Corporation (IFC) under the World Bank Group.

Besides loan from IFC, some BFIs have also acquired loans from Switzerland, Germany, Dubai and Singapore.

NRB Spokesperson Dr Gunakar Bhatta says that the BFIs are struggling to acquire foreign loans as there is a provision to invest such loans in infrastructure and development projects.

“Loans from abroad need to be invested in development projects. Such loans are expensive and therefore BFIs are facing difficulty in taking such loans and investing them in development projects,” said Bhatta.