Nepal Rastra Bank has allowed Nepali commercial banks to borrow funds from Indian banks. This is to invest only in designated areas recommended by Rastra Bank.
The Monetary Policy 2018-19 has introduced a facility for commercial banks to borrow funds from Indian Banks. Issuing a circular Rastra Bank has allowed banks to use this facility. The circular has defined some terms and conditions for borrowing funds:
The interest rate of the borrowing can be one percent point higher than the 364-day average rate of Indian Treasury Bills.
Banks cannot offer additional fees and commission to the lender and they cannot keep any collateral, guarantee, or bank guarantee to avail loans from Indian banks.
Banks must take approval from their respective board and also from the central bank before obtaining such loans.
Banks must notify the central bank regarding the loan amount availed from the Indian Banks and the repayment of principal and interest.
Such loans can be availed for 1 to 5 years and can be renewed if central bank grants permission.
The borrowed funds must be lent to the designated sectors, namely, for hydroelectric projects, bridges and other physical infrastructures (except non-tradable sectors like land, real estate development), tourism agriculture and as microcredit as well.
