The central bank has created a separate category for the home loans of up to Rs 6 million as Personal Home Loans that will not be dealt as the part of real estate and housing loans and also provided a rescheduling facility to the margin lending on shares.
“The people can get home loans as the move will instantly enhance lending capacity of
the banking sector by Rs 15 billion,” said Bhaskar Mani Gyanwali, spokesperson of the central bank that has brought the circular today in line with its mid-term evaluation of Monetary Policy.
“The central bank has also offered a rescheduling provision for real estate loans that will definitely benefit the banking and construction sectors that were under pressure for last 16 months,” he said, adding that Personal Home Loans signify that the loans given to a consumer is for acquiring residential houses or apartments only.
Fearing the eventual systemic failure by BFIs’ overexposure to real estate and housing loans, Nepal Rastra Bank had directed the BFIs to restrict the credit flow to the sector to 25 per cent of their total lending after it noticed that some commercial banks’ portfolios showed dangerously high concentration risk.
As a domino effect, the contraction in housing sector has got the BFIs struggling with loan recovery as the whole housing sector is stagnating due to NRB’s cap on housing and realty loans.
“Now, the move will provide much-needed respite to the struggling housing sector that has started to stagnate after NRB directed the BFIs to scale down their exposure to housing and realty,” said Om Rajbhandari, CEO of the Comfort Housing.
However, the central bank, banks and construction companies must boost the depositors must create conducive environment to bring the money to the banking channels, he added.
NRB has allowed BFIs to reschedule loans to realty for one time only within the current fiscal year, if the borrower pays the outstanding interest.
To save the capital market from an imminent crash, the central bank has also relaxed the provision for rescheduling the margin type loans.
“BFIs can reschedule the loan once for one year, if the borrower pays accumulated interest,” the central bank said.
“However, the banks should not misuse the spirit of the circular,” NMB Bank CEO Upendra Poudel cautioned, adding that the provision could be a breather to the banks, construction sector and the capital market too.
These provisions will definitely improve the condition of Non-Performing Loans (NPL) of the banks.
source: The Himalayan Times
