Monday, December 24, 2018

Nepal-India-Bangladesh power trade, soft loans for returning migrants and recurring banking crisis

From The Kathmandu Post: India for the first time has given explicit recognition to the tripartite arrangement in cross-border trading of electricity, paving the way for Nepal to export surplus electricity to Bangladesh via Indian transmission lines. Introducing new guidelines on cross-border trading of electricity, the Indian Power Ministry included a provision under which two countries having a bilateral agreement with the Indian government can trade electricity between them through Indian power lines after entering into agreement with the Indian government owned-Central Transmission Utility.

While issuing guidelines on cross-border electricity trade for the first time in 2017, the Indian Power Ministry had failed to recognise a possible trilateral arrangement among two countries and India. But the recently introduced guidelines by India after withdrawing the old one issued in 2017, according to the experts, provide an opportunity to its neighbouring countries— Bangladesh and Nepal—to trade electricity between them via Indian territory.

The Indian government has also removed the discriminatory provision included in the older guidelines, under which Nepali-based hydropower projects which are owned by the Indian government or have a majority Indian share were only allowed to export power to India.

>>Here is an earlier story on the same issue. 
>> Here is the full text: Guidelines for Import/Export (Cross Border) of Electricity-2018

Soft loan attracts migrant workers

From The Kathmandu Post: The government’s bid to retain migrant returnees has received an encouraging response with more and more workers applying for the financial assistance introduced to engage them in occupations within the country. Nearly 3,000 youths who are experienced in foreign jobs have applied for a soft loan since the scheme was launched on November 22. Under the scheme, skilled migrant workers who returned to the country within the past three years can apply for a soft loan of up to Rs1 million.

According to board officials, there have been 200 applicants for financial grants and the number is likely to surge before the December 14 deadline. Applicants can apply online or submit documents to the board office. For accessing financial support from the government, applicants should submit a clear business plan along with necessary documents certifying their experience and skill in a particular sector. However, not many candidates have submitted concrete business plans that would increase their chances of getting the support, Shrestha told the Post. A large number of applicants have only mentioned what they would be doing with the fund they will receive.

The foreign employment promotion board has sought a detailed business plan that would clearly mention how the enterprise would operate, the number of people to be involved in the business, and how the business would utilize their own skills. The board has not specified any sector in which it wants the fund recipients to invest or start their business.

Bankers agree to bring down deposit rate

From The Himalayan Times: Owing to pressure from Nepal Rastra Bank (NRB) and the government, Nepal Bankers’ Association (NBA) — the umbrella organisation representing 28 commercial banks of Nepal — has decided to cap the interest rate on savings, individual fixed deposits and institutional fixed deposits. The NBA meeting today decided to cap interest rate on savings at 6.5 per cent, on individual fixed deposit at 9.25 per cent and 8.5 per cent for institutional fixed deposits. The NBA decision will come into effect from Friday itself. 

The banking sector started witnessing massive interest rate volatility after the commercial banks began waging an interest rate war by offering higher rates to lure depositors by ditching their ‘gentlemen’s agreement’ on interest rates three weeks ago.

Previously, NBA had agreed upon to limit interest rate on savings to seven per cent and 10 per cent each on individual fixed deposit and institutional fixed deposit. However, some banks had started accepting fixed deposits at up to 13 per cent interest rate lately after the NBA agreement was ditched. Following such instability in the bank interest rate, the central bank had directed commercial banks to bring down the interest rate on deposits.

Moreover, a study committee of the government had submitted its report to the Ministry of Finance today recommending the central bank to scrap the provision of adding 0.75 percentage point as return on assets in the formula to derive the base rate. The suggestion aimed at bringing down the base rate of banks and subsequently the lending rate. The base rate is the minimum rate at which banks and financial institutions can disburse credit to borrowers.

>>Here are two recent articles on financial sector: errant NRB, and they had it coming