Federation takes ownership of protest by industrialistsThe Federation of Nepalese Chambers of Commerce and Industry said it took ownership of the protest movement being carried out by its member associations against high bank interest rates on business loans.
The Federation of Nepalese Chambers of Commerce and Industry said it took ownership of the protest movement being carried out by its member associations against high bank interest rates on business loans.
A delegation led by Bhawani Rana, president of the country’s largest private sector umbrella body, met with bank representatives and central bank officials in Biratnagar on Tuesday and handed over a 15-day ultimatum to the government to reduce lending rates.
The government of Province 1 organised the meeting with the disgruntled business people in the presence of central bank officials and representatives of the banking community after industrialists in the eastern region launched a stern protest against the government which included actions ranging from picketing the regional office of Nepal Rastra Bank to handing over the keys to their plants to the prime minister.
After Nepal Rastra Bank Deputy Governor Chinta Mani Siwakoti told the participants that the central bank couldn’t force banks to reduce the interest rate in an open market economy, Rana threatened to start a nationwide demonstration, according to Pawan Kumar Sarda, president of the Morang Merchants’ Association who was present at the talks.
“The meeting was supposed to address the problem of high interest rates charged by banks, but the participating Nepal Rastra Bank officials failed to do so,” said Sarda. “We will wait till February-end and launch a nationwide protest under the leadership of the federation. We will announce the details of the protest programme after holding discussions with the member associations.”
Industrialists have been accusing banks of unilaterally increasing interest rates on loans, and they have even threatened to stop making their repayment installments from next month if the interest rate was not reduced.
Industrialists have been demanding that the interest rate on loans extended to productive industries should not exceed 7 percent while the rate on commercial loans shouldn’t be higher than 9 percent. The high interest rate has allowed banks and financial institutions to enjoy rising profits while domestic industries are being pushed to the verge of closure, according to the industrialists.
While the production sector has been hard hit by high interest rates, Nepal Rastra Bank said it could not intervene to help the industrialists. As per the central bank, there is no way to bring down the interest rate charged by banks and financial institutions on loans and advances as long as they stay within the spread rate.
“The base rate is the only tool we are using to check the lending rate,” Siwakoti told the Post. “Our plan is to
gradually decrease the base rate on which banks are allowed to operate so that the interest rate on lending doesn’t shoot up.”
Many banks revised the base rate recently. They said they could not slash the interest rate on loans as central bank regulations allow them to adjust the rates only on a quarterly basis.