Nepal Rastra Bank haas ordered development banks and finance companies to raise the level of their lending to the productive sector to 15 and 10 per cent respectively by mid-2016. The productive sector includes agriculture, energy, tourism and small and cottage industries. The provision was only for commercial banks previously.
The provision of compulsory lending to the productive sector was made to ensure sustainable investment in the productive sector so that it would create employment opportunities within the country and aid poverty alleviation. Now the financial institutions have to prepare annual action plans to implement the directive and set half-yearly targets in a way that can be monitored.
NRB has already directed commercial banks to increase their lending to the productive sector to 20 per cent by mid-July 2015. The central bank has also increased the required level of lending to agriculture and energy to 12 per cent from the earlier 10 per cent for commercial banks. However, A class banks have to maintain their lending to these two sectors at 10 per cent within the current FY according to the latest directive. NRB has also defined agriculture sector loan, energy loan, tourism sector loan, cottage and small industry loan which have been categorized as productive sector loans.
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