As per the Working Procedure on Interest Subsidy for Agriculture Loans to the Youth published by Nepal Rastra Bank (NRB), people in the age group of 21 to 45 years are eligible to get subsidized agricultural loans from commercial banks at 6 percent interest.

While banks are permitted to charge interest at a rate of 10 percent per annum on

such concessional loans, the government provides a 4 percent subsidy which means borrowers actually pay only 6 percent.

RBB CEO Krishna Prasad Sharma said that they would lend at 9 percent interest so that with the government’s 4 percent subsidy, the borrower would have to pay only 5 percent interest.

As per the central bank’s working procedure, the subsidized loans can be used in areas like vegetable production, processing and storage; seed production, processing and storage; floriculture; livestock; fruits production, processing and storage; and dairy production, processing and sales.

Fishery, production and sales; mushroom production, processing and storage; animal slaughter house and meat business; herbal production, processing and storage; sugarcane, cardamom and ginger farming, storage and processing; and agriculture business are the other areas approved for the subsidized loans.  

RBB has planned to increase agricultural loans by Rs 5 billion this fiscal year. According to Sharma, the country’s largest bank has started getting applications for the loans under the youth centred loan programme of the government.

“We will soon be inviting interested youths to apply for loans under this programme,” said Sharma.

Meanwhile, RBB has also reduced the interest rate on deprived sector loans. Those receiving financing of up to Rs 200,000 under the deprived sector will be charged interest at a rate of 8 percent per annum. Earlier, interest rates ranged from 9-10 percent, according to RBB.

The bank’s interest rate for wholesale lending to micro-finance institutions (MFIs) has been fixed at 4-5 percent. The MFIs in turn re-lend the funds to the poorer sections of the population. RBB has pledged that borrowers will get loans under the deprived sector within five days of receiving the application.

Moreover, RBB will provide insurance coverage to deprived sector loans of

up to Rs 200,000.  “We will bear the cost of insurance ourselves. This move is an attempt from our side to contribute to the principle of inclusion,” he said.

The bank has also planned to establish a subsidiary micro-finance institution.

Similarly, RBB has slashed the interest rate on loans issued to civil servants and teachers by 1 percent. They will now be charged 9 percent interest compared to 10 percent earlier, said Sharma.