December 1: The flow of concessional loan from banks and financial institutions (BFIs) has increased after the Nepal Rastra Bank (NRB) made it mandatory for BFIs to issue loans under this heading.

As of mid-October, banks have invested Rs 72.46 billion under the heading of concessional loan. The investment under concessional loan  was less than Rs 64.95 billion till mid-September.

According to the central bank, BFIs invested Rs 7.51 billion as concessional loan within a period of just one month. Bankers say that the flow of loan under this heading was affected to some extent after the government imposed lockdown in late March.

The central bank informed that commercial banks, development banks and finance companies have provided majority of loans under the heading of concessional loan to the agriculture sector. Out of Rs 72 billion concessional loans provided till mid-October, 84.43 percent has been provided to the agriculture sector.

According to the central bank, a total of 27,369 individuals have taken Rs 61.25 billion concessional loan for commercial farming and animal husbandry.

BFIs have provided Rs 1.06 billion loan without any collateral. The remaining amount of Rs 60.01 billion has been provided against collateral, shows data kept by the NRB.

Under the heading of concessional loan, farmers can avail up to Rs 50 million per person at 5 percent interest rate. Loan more than Rs 50 million can be provided at 2 percent interest rate.

Banks and financial institutions fix the rate of interest by adding 2 percent to the base rate. The government provides 6 percent concession for women entrepreneurship while banks are entitled to receive 5 percent concession for all other categories under the concessional loan.