April 18: Banks have been demanding collateral even for commercial farming and livestock loans, which fall under the category of concessional loan. Bank and Financial Institutions (BFIs) have only disbursed 1.8 percent of the total concessional loan issued for agriculture at a subsidized interest rate of 5 percent as of mid-February.  According to Nepal Rastra Bank, a total of Rs 88.29 billion have been distributed under the concessional loan category. Out of this, only Rs 1.60 billion have been distributed without collateral. The remaining Rs 86.69 billion has been disbursed by keeping collateral.
As of mid-February, 38,355 people have benefited from the commercial farming and livestock loans at subsidized rate. A total of 2,542 people took such loans in between mid-January to mid-February. Although the credit flow without collateral is low, the number of borrowers and the total credit flow to the agricultural sector has increased.
Government-owned banks are in the forefront in providing agricultural loans without any collateral. Agriculture Development Bank is in the top list of banks providing such loans. Out of the total loan of Rs 1.60 billion disbursed by banks without any collateral, the Agriculture Development Bank alone has released more than Rs 1 billion.

 Hemal Poudyal, the spokesperson of Agriculture Development Bank, said that the bank disbursed between Rs 500,000 to Rs 1.5 million to around 1,600 people without collateral.

"As it is a state program, we have given collateral-free loans even if there is risk of loss," he told New Business Age.

There is an arrangement for BFIs to allocate loans of Rs 300,000 to Rs 50 million under various headings. Banks can give up to Rs 50 million of such loans to the agriculture sector. Chairman of Nepal Bankers' Association Bhuvan Kumar Dahal informed that those who do not want to pay the loan or cannot do so often do not have collateral.
Manoj Gyawali, Deputy General Manager of Nabil Bank, admits that it is natural for the banks not to disburse loans without collateral.
"Banks do not want to risk their investment by disbursing loans without collateral," he said. "According to the NRB's provision, each branch of commercial banks has to give ten concessional loans, that is 500 loans per year," said Gyawali. Banks try to provide such loans on collateral. He said that the central bank has not barred them from keeping collateral for providing concessional loans.
As of mid-February, BFIs have disbursed concessional loans to 77,198 borrowers under ten headings. Banks are yet to recover Rs 124.28 billion from the borrowers.
Apart from agriculture and livestock loans, BFIs have allocated most of the loans to women entrepreneurs. Banks have been providing concessional loans to women entrepreneurs at a subsidized interest rate of 6 percent.
By mid-February, the number of women entrepreneurs taking women entrepreneurship loans from banks and financial institutions has reached 36,763. The NRB informed that loans amounting to Rs 32.95 billion have been disbursed during this period. In January, the number of such debtors was 30,465. During this period, loans amounting to Rs 27.05 billion was released.
Under the concessional loan for education, 132 people have received Rs 61 million in the first eight months of the current fiscal year.
Bankers argue that it is risky to give loans to young students by keeping their certificates as collateral.
Under the heading of youth project loans for returnee migrant workers, 671 people are yet to pay back Rs 513.7 million.
Likewise, BFIs have released loans under the Dalit Community Business Development Loan to 733 individuals. The debt stands at Rs 456 million.
So far, 88 people have received loans under higher education and technical and vocational education loans. There arrears is Rs 33.3 million. The flow of loan under this category has not increased encouragingly since January.
The number of earthquake victims who have taken loans to build private houses has also increased.
The number of such debtors has increased from 238 in January to 237 in February.
Likewise, 205 industrialists have availed the concessional loan given by the government to promote the textile industries.