Reducing risk burden increases the ability of banks and financial institutions to provide loans.
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The risk weight of small and medium enterprises (SME) loans has been reduced. Nepal Rastra Bank has issued a circular to implement the new system. Earlier, such a weight was 75 percent.
The Rastra Bank has also set a 60 percent risk weight for loans flowing to the agriculture, information technology, and manufacturing sectors. Banks and financial institutions have been instructed to make insurance of projects to which loans are disbursed mandatory.
Reducing the risk weight will increase the ability of banks and financial institutions to disburse loans. The government had mentioned in its 100-point agenda to reduce the risk weight in the agriculture, small and medium enterprises, and information technology sectors. Based on the same decision, the Rastra Bank has reduced the risk weight of loans flowing to these three sectors.
‘Nepal Rastra Bank will make arrangements within 30 days to reduce the current risk weight in the loan flow to the small and medium enterprises (SME), agriculture, and information technology sectors to an appropriate level,’ the agenda states.
