Ministry of Finance instructs Rashtra Bank to give suggestions within December
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The integrated procedure for subsidizing interest for subsidized loans is going to be amended. According to the Ministry of Finance, the government is going to revise the existing procedure due to the fact that the government could not pay about 14 billion for interest subsidy, the bank's interest rate has dropped to single digits, and questions have been raised about the usefulness of the loan.
"In the context of declining interest rates and the question of utilization of subsidized loans, the Rashtra Bank has been instructed to suggest if any changes are necessary in the interest subsidy procedure," Finance Secretary Ram Prasad Ghimire said.
Ministry of Finance has yet to pay about 14 billion rupees for interest subsidy. However, Finance Secretary Ghimire informed that some of the arrears will be paid within a day or two.
'Only 3 billion rupees were paid in the last financial year, a study conducted in the meantime raised some questions regarding the utilization of subsidized loans, so the payment was pending,' he said, 'We have talked to the Rashtra Bank in this regard, some amount will be paid within a day or two. Finance Secretary Ghimire said that after the payment of that amount, there is a plan to revise the procedure and resume the concessional loan. "Rastra Bank has been instructed to give suggestions within this year if the procedure is amended," Ghimire added, "Work is being done to resume loan flow from January."
The procedure has not been modified since 2077. Compared to that time, the interest rate is now much lower, a study conducted by the National Bank through an independent examiner has shown that about 18 percent of subsidized loans have been misused.
'According to the latest revision, the interest rate was high in 2077, at that time, 6% interest subsidy was given to women entrepreneurs and 5% interest subsidy to the remaining nine types of loans. Now the interest rate itself has come down to single digits (seven/eight percent). Even in such a situation, the National Bank will also suggest whether the interest subsidy is right/wrong," the source said, "There are currently 10 types of loans available under interest subsidy, how relevant are they? Every loan has a maximum limit. The National Bank will also give suggestions regarding reducing/increasing the title of a loan.'
It seems that through the amendment of the procedure this time, the Ministry of Finance also wants a strong policy arrangement that the National Bank and banks and financial institutions should be accountable for the utilization of concessional loans. "Banks and financial institutions and the National Bank have expertise in credit flow and utilization," the source said, "so they should ensure loan utilization, the government will regulate the amount of interest subsidy."
An independent assessment showed that about 18 percent of the subsidized loans disbursed by banks and financial institutions under the subsidized loan program were misused. Joshi & Bhandari Chartered Accountants, who have been given the responsibility of consultants to determine the effectiveness and proper use of subsidized loans under the instructions of the National Bank, have shown this in the evaluation report.
Among the evaluated loan files, 7 percent of unutilized loans, 12 percent of unidentified target category, 6 percent of dual use and 11 percent of suspected misused loans are mentioned in the report.
Not identifying the target group, double consumption and suspicion of misuse are also misuse of credit. It has been concluded that about 18 percent of concessional loans have been misused, with 7 being misused and 11 being suspected of being misused. Rashtra Bank says that this data includes loans that have not been identified as target groups and have dual use.
With the aim of increasing production, creating jobs and developing entrepreneurship, the government introduced a concessional loan program of interest subsidy, but after receiving many complaints about its use, the Rastra Bank announced that the monetary policy of the fiscal year 2078/79 would be evaluated by an independent auditor.
According to the same arrangement, Joshi & Bhandari Chartered Accountants were appointed as consultants to determine the effectiveness and proper use of refinance, business continuity loans and subsidized loans.
consultant inspected the files of 31 thousand 674 (18.63 percent) borrowers out of 170 thousand 46 borrowers who took concessional loans during the evaluation and inspected the project site of 1 thousand 838 borrowers. The same evaluation report has shown that the mentioned number of loans have been misused. Based on the
report, the relevant banks and financial institutions have been instructed to return 7 percent of unutilized loans. The Board of Directors of Rashtra Bank took this decision in January 2080. Based on the evaluation report, the board of directors of Rashtra Bank has decided to ask for the refund of the misused loans, considering the issues to be considered while deciding the future policy to provide programs/facilities of this nature. Rashtra Bank sources said that some of the loans have already been recovered.
The National Bank has also decided to alert the Chief Executive Officers of the respective banks and financial institutions based on the conclusion that the credit has been misused because the banks and financial institutions have not strengthened the internal control system.
The Board of Directors of the Rashtra Bank has also instructed its Bank and Financial Institutions Regulation Department to provide the details of the loans suspected of loan abuse to the respective banks and financial institutions and to test their usefulness through the internal audit of the institution and submit a report.
Citizens have not received subsidized interest loans from banks and financial institutions for two years. Banks stopped disbursement of the loan when the government (Ministry of Finance) did not pay the amount for the interest subsidy. At present, about 14 billion rupiah is yet to be paid by the government for the interest subsidy. Therefore, banks and financial institutions have not provided subsidized interest loans to new borrowers. On the contrary, they are charging full interest (including the government subsidy) from borrowers who have taken subsidized loans.
The government has not paid the interest subsidy money to the banks for the last two years (October 2079 to date). As the grant payment arrears increased, in the last few months they have stopped providing new subsidized loans and are also collecting full interest from the old borrowers.
In interest subsidized loans, the government should pay the insurance fee to the insurance company and the loan protection fee to the deposit and loan protection fund to the banks and financial institutions through the Rashtra Bank. 3 billion was paid in the last financial year due to the suspension from October 2079. Rashtra Bank sources said that about 14 billion rupees remained since then.
