As per the new directive issued by the central bank on Monday, NRB has allowed a conditional renew or rescheduling of loans extended by financial institutions to realty sector. As per the latest rule, realty borrowers will have to pay 25 percent of outstanding interest plus principal to be enabled for one-time renew or reschedule remaining 75 percent principal for a year. [break]
The tightening of lending to realty sector, which was the fastest growing industry, suddenly took a path of downturn after the central bank announced a number of measures that squeezed flow of bank credits to the sector.
The directives issued in January last year had directed banks and financial institutions to bring down their loan exposure to real estate and housing to 30 percent of the total lending portfolio by the end of the current fiscal year. However, such limitation in case of lending only to real estate was fixed at a maximum of 15 percent within the period.
The latest directive has come after a number of reports released recently reckoned that strict measures taken to cool down the overheated realty sector might squeeze already weak economic growth in the future.
The World Bank has also pointed that there has been slackness in the construction sector as a result of ongoing curb on bank financing to real estate sector and added that it can further shrink the growth prospects for the next fiscal year.
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