Lawmakers okay project financing in BAFIA

REPUBLICA

KATHMANDU, June 5: A sub-committee of Parliamentary Bills Committee Sunday decided to add a new clause in the amendment to Banks and Financial Institutions Act (BAFIA) that allows BFIs to sanction loan against any project as collateral.

Ekraj Bhandari, member of the committee, told Republica that the sub-committee agreed to include a provision in BAFIA that allow BFIs to sanction loans against projects without furnishing additional collaterals.

“Though the decision has yet to be drafted, we have agreed to include the provision in BAFIA,” he said. He, however, added that the provision will not compel BFIs to sanction such loans.

“BFIs will have full authority to decide wether or not to grant loan even after the new provision comes to effect.”

Commenting on the development, bankers said such provision was not necessary. Suman Joshi, CEO of Laxmi Bank, said the new provision will not have much impact as banks were already providing loan to companies having reliable balance sheet without additional collaterals.

“Even if there is a provision in BAFIA, banks will not take risk by sanctioning loans to companies that do not have sound balance sheet,” added Joshi.

After preparing the final draft, the sub-committee will forward it to the parliament for approval. Bankers have been opposing the amendment to BAFIA, saying that the amendment, if endorsed, will devastate the banking sector.