Nepali commercial banks have taken loans of Rs 59.17 billion from foreign companies in the past five years.
According to Nepal Rastra Bank (NRB), foreign companies over the period injected the aforementioned amount of loans to a dozen of commercial banks. Since April 3, 2018, the central bank has permitted commercial banks to borrow from foreign financial institutions.
Commercial banks have been allowed to borrow funds equivalent to up to cent percent of their primary capital from foreign financial institutions. Citing the shortage of loanable funds at that time, the NRB gave this permission to facilitate availability of funds.
Subsequently, NMB Bank for the first time took borrowing of Rs 1.50 billion (USD 15 million) from the International Finance Corporation (IFC) under the World Bank. Over the period, NMB Bank has taken more than Rs 8 billion in foreign loans.
Likewise, Sanima Bank has taken foreign loans of USD 45 million, out of which USD 15 million has been paid back. Machhapuchchhre Bank, former Mega Bank, Laxmi Bank, Global IME Bank, Sunrise Bank and Everest Bank are among others to have received a notable amount of loans from foreign institutions.
According to NRB, there was a massive rise of banks assuming loans from abroad mainly since last fiscal year when the country had faced a decline in foreign currency reserves and banks started facing shortage of liquidity.
In the nine months of the current fiscal year alone, banks have taken foreign loans of Rs 4.36 billion. Of the amount, the IFC was the main lender.
Recently, the central bank has also permitted development banks, finance companies and microfinance to take loans from abroad. However, the banks and financial institutions have been made mandatory to invest such loans only in productive sectors that include development of physical infrastructure, tourism, agriculture, cable cars and small and medium industries, among others.
