Economy, Market Watch

Govt to Reimburse 400mn Banks this Year

Published by Octron on June 22, 2009

The government is planning to pay within this fiscal year all the money it owes to government-owned banks for getting them to write off loans adding up to Rs. 5.1 billion taken by farmers and small entrepreneurs. The government had announced through the budget speech this year that both principal and interest of loans of up to Rs.30,000 would be waived.

Likewise, it has also been announced that the interest and fines of loans of up to Rs. 100,000 would be cancelled. Although the government had planned to compensate the banks within 10years, it has decided to pay them this year, said a senior official of the Finance Ministry. “We will decide this issue within this week, “the official added.

The government has allocated Rs. 400 million to repay the banks. They include Agricultural Development Bank, Rastriya Banijya Bank and Nepal Bank. They have waived loans amounting to Rs. 5.1 billion as per the government’s write-off plan. The government still has around Rs. 18 billion reserved in the national treasury as it failed to spend the budget on development activities.

The government has been able to spend just Rs.33 billion in cash and around Rs. 10 billion in commodities and direct grants for development purposes as of mid-June. The government has allocated Rs. 92 billion for capital expenditure. Earlier, the banks had requested the government to pay all the outstanding dues to them given the government’s failure to spend the money.

The Agricultural Development Bank had written off the largest amount in such loans which stands at Rs. 4.17 billion, according to its CEO Janak Shah. “We have already sent all the details about the write-off to the ministry, “he said. He expected that with the payment from the government, the bank would be able to maintain its liquidity in a good condition.

Likewise, the Rastriya Banijya Bank and Nepal Bank have written off loans adding up to Rs. 650 million and Rs. 270 million respectively, according to officials of the two banks.

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