NRB introduces RSRF operation directive

KATHMANDU, Feb 27: Nepal Rastra Bank, the banking sector regulator, has introduced an operation directive for the Rural Self-Reliance Fund (RSRF) -- a state-owned wholesale lender -- that, among others, outlines responsibilities of the fund, credit line the fund can provide to cooperatives and other financial intermediaries, interest rate on these loans and groups the fund should cater to.



The directive, approved by the Ministry of Finance on February 13, replaces the RSRF credit directive based on which the fund used to operate.[break]



The RSRF was established in 1991 by the government and the central bank to ease credit access to self entrepreneurs, cottage industries and small and medium enterprises so as to reduce the incidence of poverty in the country. The RSRF, which currently has a fund of Rs 620 million, provides wholesale credit at relatively low interest rates to cooperatives, NGOs working as financial intermediaries and microfinance institutions, among others.



As per the directive, the RSRF can extend wholesale loans to cooperatives and NGOs working as financial intermediaries and long term wholesale loans to microfinance institutions and Agricultural Development Bank Limited.



The RSRF can provide a fund of up to 20 times the core capital or up to Rs 2.5 million to cooperatives and NGOs that are borrowing for the first time. Once this amount is paid back, cooperatives and NGOs can be entitled for a credit line of up to 15 times the amount of their core capital or up to Rs 3 million. Cooperatives and NGOs borrowing for the third time can get a credit line of up to 15 times the amount of their core capital or up to Rs 3.5 million.



All these borrowers should be based in rural areas. And priority should be given to areas that fall in the poverty map created by the National Planning Commission, says the directive.



“The RSRF cannot slap interest rate of more than eight percent while providing loans to cooperatives and NGOs,” the directive says. “The cooperatives and NGOs, in turn, cannot slap interest rate of more than 14 percent while providing loans to retail borrowers.”



Likewise, the RSRF can also provide long term wholesale loans to Agricultural Development Bank and microfinance institutions.



“The long term wholesale credit can be issued for the purpose of tea farming, establishment of tea processing and packaging units, coffee farming, processing and packaging and cardamom farming,” the directive says. “Long term loans can also be extended for the purpose of building cold storage facilities.”



Interest rate on long term credit should be equivalent to refinancing facility rate fixed by Nepal Rastra Bank, the directive further says.

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