Tuesday, August 14, 2012

NRB permits export loan in foreign currency

KATHMANDU, AUG 13: 

Exporters can now obtain pre-shipment and post–shipment loans from financial institutions in foreign currency.

The central bank has allowed commercial banks and development banks to lend $ 1 million or its multiple as pre-shipment and post–shipment loans to export-oriented industries that earn foreign currency. The borrowers need to pay both the principal amount and interest in foreign currency.

The central bank already allows banks to provide exporters and hydro projects loans in foreign currency. The move comes in line with the monetary policy for this fiscal year that had announced such a facility to encourage export industries as they need to make payments for raw materials in foreign currency and then receive payments in foreign currency.

Nepal Rastra Bank (NRB) has fixed a maximum of 2.25 per cent addition to LIBOR. LIBOR stands for London Inter Bank Offer Rate which is fixed by leading London banks and is the benchmark for bank rates all over the world.

Moreover, NRB will also provide refinancing to the financial institutions for such loans at LIBOR plus 0.25 per cent interest rate for six months against the collateral of good loans, according to the circular published today. The banks need to pay back the refinanced loans in foreign exchange.

Last fiscal year, the central bank had allowed licensed hydropower companies to issue foreign-currency debentures in Nepal.

The hydro power projects that generate income in foreign currency can raise needed funds for developing a project by issuing foreign-currency bonds through the subsidiary merchant banking arm of commercial banks and development banks.

Himal Power Company has already undertaken preliminary steps to issue $60 million worth debentures in the domestic financial market.

Source: THT

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