KATHMANDU, DEC 12 - 2011
With the government refusing to give more money to the loss-making Nepal Electricity Authority (NEA), the public utility has taken emergency loans from two banks on the basis of competitive interest rates for six months.
The cash-strapped NEA has borrowed Rs 500 million from Mega Bank and Siddhartha Bank. Eleven commercial banks had offered to loan it money and quoted interest rates ranging form 9.99 percent to 12.5 percent per annum.
Mega had quoted an interest rate of 9.99 percent per annum for a loan of Rs 200 million, 10.49 percent for another Rs 75 million, and 10.49 percent for a further Rs 75 million. Likewise, Siddhartha Bank had quoted 10 percent for Rs 200 million.
Energy secretary and chairman of the NEA Bala Nanda Poudyal said the authority was able to get credit from the banks at a relatively cheaper rate as they were awash in liquidity. “The NEA was facing a cash crunch and we wanted to repay our outstanding debts,” added Poudyal.
The NEA has a cumulative loss of Rs 24 billion, and its average annual loss stands at Rs 6 billion.
As Mega and Siddhartha offered loans at a relatively lower interest rate, the public utility chose to borrow money from them. Other banks which offered credit to the NEA were Nabil, Commerz and Trust, Everest, Laxmi, NIC, Kist, Janata, NMB and Himalayan.
Banks saw the NEA as an opportunity with their surplus liquidity and government securities and inter-bank lending not looking so inviting. The inter-bank lending rate stands at just 1 percent.
Mega’s average cost of funds is 9.69 percent, according to the bank’s first quarter un-audited financial highlights. It will get just over 10 percent on its Rs 300 million loan to the NEA.
“As the NEA is a government backed institution, only sovereign risk is associated with such lending; so we decided to lend to the NEA despite a low spread and its poor financial health,” said a senior official at Mega Bank. “We extended credit to the NEA not only to earn interest but also to help it to operate smoothly.”
According to Shambhu Nath Gautam, general manager of Siddhartha Bank, the lending was done from short-term funds acquired at low cost. “It is natural to get a low rate of interest while making short-term lending,” said Gautam.
Source: Kantipur
With the government refusing to give more money to the loss-making Nepal Electricity Authority (NEA), the public utility has taken emergency loans from two banks on the basis of competitive interest rates for six months.
The cash-strapped NEA has borrowed Rs 500 million from Mega Bank and Siddhartha Bank. Eleven commercial banks had offered to loan it money and quoted interest rates ranging form 9.99 percent to 12.5 percent per annum.
Mega had quoted an interest rate of 9.99 percent per annum for a loan of Rs 200 million, 10.49 percent for another Rs 75 million, and 10.49 percent for a further Rs 75 million. Likewise, Siddhartha Bank had quoted 10 percent for Rs 200 million.
Energy secretary and chairman of the NEA Bala Nanda Poudyal said the authority was able to get credit from the banks at a relatively cheaper rate as they were awash in liquidity. “The NEA was facing a cash crunch and we wanted to repay our outstanding debts,” added Poudyal.
The NEA has a cumulative loss of Rs 24 billion, and its average annual loss stands at Rs 6 billion.
As Mega and Siddhartha offered loans at a relatively lower interest rate, the public utility chose to borrow money from them. Other banks which offered credit to the NEA were Nabil, Commerz and Trust, Everest, Laxmi, NIC, Kist, Janata, NMB and Himalayan.
Banks saw the NEA as an opportunity with their surplus liquidity and government securities and inter-bank lending not looking so inviting. The inter-bank lending rate stands at just 1 percent.
Mega’s average cost of funds is 9.69 percent, according to the bank’s first quarter un-audited financial highlights. It will get just over 10 percent on its Rs 300 million loan to the NEA.
“As the NEA is a government backed institution, only sovereign risk is associated with such lending; so we decided to lend to the NEA despite a low spread and its poor financial health,” said a senior official at Mega Bank. “We extended credit to the NEA not only to earn interest but also to help it to operate smoothly.”
According to Shambhu Nath Gautam, general manager of Siddhartha Bank, the lending was done from short-term funds acquired at low cost. “It is natural to get a low rate of interest while making short-term lending,” said Gautam.
Source: Kantipur
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