September 24: The government is preparing to expand the score of credit guarantee on provided by banks and financial institutions. The government’s decision to amend the Credit Guarantee Regulations 2080 to allow credit guarantee programs in new areas has paved the way to expand the scope of the Deposit and Credit Guarantee Fund (DCGF).
According to the revised regulations, the fund will be able to launch new credit guarantee programs in areas related to climate change, start-ups, information technology, skill development training, environmental protection, disaster management, alternative and renewable energy, women's entrepreneurship, etc. For this, the fund can take appropriate decision based on the size of the credit guarantee fund, financial resources of the fund, market demand and needs.
So far, the fund has been guaranteeing credit provided to small and medium enterprises by banks and microfinance companies as well as deprived sector lending and loans provided at subsidized interest rates.
Ramesh Ghimire, the chief executive officer of DCGF, said that the amendment of the regulations has paved the way for the fund to expand the scope of credit guarantee in the areas according to market needs. He claimed that the role of the fund is important in expanding the access to credit in Nepal and that the banks have been able to extend credit with confidence because of security assurance.
Until the last fiscal year, the fund covered credit guarantee of loans worth Rs 2.74 billion of 1.7 million borrowers.
Once the banks have been assured of credit guarantee, the DCGF will have to bear the loss if the banks fail to recover the loans due to any reason.
For this, the banks and financial institution or the liquidator should make a claim with the fund for the loss they have had to bear.
Since 2010, the fund has also been giving credit guarantee for deposits up to Rs 500,000 in the individual accounts maintained at banks. As of last fiscal year-end, the Deposit and Credit Guarantee Fund assured to guarantee deposits worth Rs 1233 billion maintained at 41.5 million accounts.