Entrepreneurs Protest against Working Capital Loan Guidelines issued by NRB

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Entrepreneurs Protest against Working Capital Loan Guidelines issued by NRB

September 23: The private sector has started street protest demanding amendment to the Working Capital Loan Guidelines issued recently by the Nepal Rastra Bank.

Representatives of 16 district and municipal units of the Madhes chapter of the Federation of Nepalese Chamber of Commerce and Industry initiated the protest in Birgung from Thursday.

The participants of the protest rally, who appeared with black arm bands and placards, also sent a memo to NRB Governor Maha Prasad Adhikari.

The industrialists argued that the guidelines, which will come into effect from October 18, will result in the closure of industries if it is implemented as it is.

Speaking in an interaction ahead of the protest rally, FNCCI Vice President Dinesh Shrestha said that the businessmen have chosen the path of protest during the festive season due to the impractical policy of the banks.

Shrestha said that the central bank disregarded the suggestions given by the private sector before formulating the guidelines. He accused the banks of creating financial terror by increasing the interest rate to 15 percent.

He argued that the interest on loans can be brought down to a single digit if it is to be increased on the basis of inflation.

According to Shrestha, the new policy benefits those who collect interest while the business community is at the receiving end.

“If this is the only way forward, I urge the government to take over all the business by compensating us and we shall enjoy interest from the money instead of getting involved in entrepreneurship,” said Shrestha.

The memo sent to the governor through the regional office of NRB states that the business sector is apprehensive and confused due to the  provisions introduced by the central bank at a time when economy was struggling to return on track in the aftermath of the Covid-19 pandemic and the global economic crisis.

As per the new guidelines, the central bank has capped the limit on working capital loan to 20 percent in case of a company whose annual transaction is less than Rs 20 million. However, they can avail up to 40 percent loan under special circumstances. In case of a company whose annual transaction is over Rs 20 million, they can avail 25 percent loan. 

This provision, according to the private sector stakeholders, is impractical.

According to the president of Madhes chapter of FNCCI Gamesh Prasad Lath, the central bank should provide at least 50 percent loan as working capital taking into consideration the issues such as the annual transaction of the company as well as the dues they are yet to collect from the market and their stock.

On the other hand, Nepal Rastra Bank’s Governor Maha Prasad Adhikari has defended the central bank’s move to amend the Working Capital Loan Guidelines arguing that the new guidelines were introduced to control “over financing.”

Adhikari argued that the new provisions were introduced because the businessmen were using loans provided to meet their day-to-day expenses were spent on other purposes.

 

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