May 24: The country’s business sector has demanded abolition of the recent directive issued by Nepal Rastra Bank (NRB) on consortium of old credits citing inappropriate. A meeting of Federation of Nepalese Chamber of Commerce and Industries (FNCCI), Finance and Insurance Committee held on Monday has decided to demand abolition of the directive. The meeting concluded that the directive will lead to increase in business costs creating difficulties to do businesses.

NRB on 15 Nov, 2015, issuing a circular, directed Banks and Financial Institutions (BFIs) to convert multilateral banking loans worth more than Rs 500 million to consortium loans within the end of current FY. According to businessmen, the directive will lead to a 1.5-2 percent increase in their business costs. “Businesses will be difficult to operate if appropriate standard is not used for interest determination,” says Dinesh Shrestha, Vice Chairman of FNCCI.

Currently, interest rate is determined through competition and mutual understanding between banks and businesses. Businessmen say that under consortium financing, loan interest rate will be determined based on the highest interest cost of affiliated banks which will increase cost of industries.

“The meeting has also decided of demanding NRB a similar accreditation to drafts and documents like letters as of LC in banking system,” informs Shrestha. Additionally, the meeting has also demanded of immediate implement of revitalisation fund. The meeting stressed the government to contribute necessary money in the fund which has not been implemented even after a long time since establishment.