The loan will be provided to boost the small business and industries affected by coronavirus pandemic. This refinancing procedure aims to minimize the impact of coronavirus on the country’s economy and reviving the businesses.
Nepal Rastra Bank will provide finance to banks and financial institutions which will ultimately be provided to various businesses. Banks and financial institutions will mobilize the funds directly by providing refinancing facilities at concessional rates targeting small borrowers.
Types of Refinance Loan
Nepal Rastra Bank has categorized the refinance loan into the following three categories:
A) Micro, Cottage and Small Enterprise Refinance Loan
- This type of loan shall be made available to those entrepreneurs involving himself in the business.
- The maximum Loan limit shall be NRs.15 lakh.
B) Special Refinance Loan
Currently, Nepal Rastra Bank has the following sector's loan under special refinance loan:
- The loan provided to entrepreneurs carrying export
- Loan to woman entrepreneurs
- Loan to the business operated by a differently able person
- Loan to areas affected by natural calamities
Nepal Rastra Bank may add some other business to be grouped under special refinance loans from time to time.
C) General Refinance Loan
Those loans not covered under Micro, cottage & small enterprise refinance loan and special refinance loan are under this category. Nepal Rastra Bank may categorize such loans from time to time.
Features & Benefits of Refinance Loan
- No Collateral or Security is required by the Banks offering refinance loan,
- Every bank branch have to release at least five refinance loans,
- Business affected by COVID 19 pandemic should be given high priority along with low income & marginalized section,
- The refinancing fund size is 100 Arab however NRB can float up to 200 Arab refinancing loans in the market as per necessity.
Loan limits under Refinance Loan
Businesses can obtain refinance loan provided under Micro, cottage and small refinance loan category up to 15 lakh per individuals/businesses, whereas it shall be 5 crores per business for Special refinance loan and General refinance loan. However, the refinance procedure also states that businesses can get up to NRs.20 crores refinancing loan at a 5% interest rate from NRB’s refinancing fund.
Earlier the maximum refinances loan limit was 50 crores. Nepal Rastra Bank has lowered the maximum loan limit to ensure that more businesses have access to subsidized loans.
Refinance Loan Interest Rate
The interest rate to customers for refinancing loans shall be fixed by Nepal Rastra Bank from time to time. Currently, the interest rate varies from 3% to 5%.
The interest rate for various category of loan is stated in the table below:
| S.No. | Type of Refinance Loan | Interest Rate to Customer |
| 1. | Micro, Cottage & Small Enterprise Refinance Loan | 5% |
| 2. | Special Refinance Loan | 3% |
| 3. | General Refinance Loan | 5% |
Also Read: Small Business Ideas after Lockdown
Refinance Loan Eligibility
A) Loans eligible for Micro, cottage and small enterprise refinance loan:
- Loans disbursed to businesses in operation up to 15 lakh,
- Loans disbursed to those businesses up to 15 lakhs closed due to natural calamities that were in operation before such natural calamity and have future business potential.
- Additional loan required for the revival of the micro, cottage and small enterprise affected by natural calamities,
- Loans provided to entrepreneurs returning from abroad,
- Agriculture production & processing, livestock farming, hatchery, fisheries, etc.
- Agricultural equipment manufacturing, sales or distribution,
- Loans disbursed to cottage industries and agriculture-based industries.
B) Loans eligible for Special refinance loan:
- Loans to export-oriented industries in operation,
- Loans to the business operated by woman, adibashi, janjati, madhesi, dalits and differently able person with low income,
- Loan to sick industries and areas affected by natural calamities,
- Loan to the person going for foreign employment,
- Loan to areas highly affected by COVID 19 pandemic as specified by Nepal Rastra Bank.
C) Loans eligible for General refinance loan:
- Loans to industries or businesses related to hydropower project, agriculture sector, livestock and fisheries, businesses run by youths who have returned from abroad employment or study, tourism industry, construction industries, education, health, communication, entertainment, airlines, public transport, medicine industries, diagnostic center, health education organization, hospital, waste recycling.
- Loans for the development of tourism infrastructure with huge tourism potentials such as Pathibhara, Maipokhari, Bhimeshwor, Kalinchowk, Halesi, Langtang, Swargadwari, Upper Mustang, Gadhimai, Janakpurdham, Rara, and Khaptad.
- Industries not operated in full capacity due to coronavirus pandemic but having huge business potential in the future.
- Loan to Cottage Industries, Agriculture & Forest products based Industries, Energy-based Industries, Infrastructure Industries, Tourism Industries, Industry based on Information & Information Technology, Service Industries, National Priority Industries as mentioned in Schedule 4 of Refinance loan procedure.
Businesses not eligible for Refinance Loan
- The loan provided for personal purposes in the form of overdraft loans, home loans, vehicle loans, household loans, margin loans, gold loans, social loans, and other personal loans.
- Enterprise already obtaining the subsidized loan
- Return on Equity is 20% or more in the last financial year
- Liquor and liquor-related, cigarette, tobacco, khaini, guthka, and other tobacco-related industries.
Documents Required for Refinance Loan
Following are the main details and documents required for Refinance Loan:
- Application
- Audited financial statement of the last three years
- Tax clearance certificate of the last financial year
- Credit Information Centre report of the company
- Details of refinance loan availed earlier by the customer; if any
- Self-declaration from the customer regarding the non-availability of refinance loans from other financial institutions.
- General information of the company and its role in employment generation & foreign currency earnings.
- Other documents
- For the purpose of export refinance loan following documents are required:
- Documents proving the export and foreign currency earnings in earlier financial years,
- Other documents proving the entity as an export-oriented industry.
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