KATHMANDU, 03 NOV 2014Â Â – The parliamentary Agriculture and Water Resources Committee on Sunday ordered the government to defer until next week the implementation of the Working Procedure on Interest Subsidy for Agriculture Loans to the Youth. Under this plan, young people can borrow money at an interest rate of 6 percent.
The order followed complaints from the Ministry of Agricultural Development that it was not consulted when the working procedure was being prepared and that it contradicted its existing programmes. Nepal Rastra Bank (NRB) issued the working procedure last week after getting the Finance Ministryâ€™s okay.
The parliamentary panel said that it would issue definite instructions to the government on Friday after consultations with the Finance Ministry.
According to the procedure, youths aged between 21 and 45 years are eligible to get farm loans from commercial banks at 6 percent interest, but the Agriculture Ministry said that its youth-centric programme which launched Sunday targeted people aged 18-50 years.
Banks issue credit to youths engaged in commercial farming and agro-processing industries at 10 percent interest and 4 percent of the interest payment is subsidized by the government.
Speaking at a meeting of the parliamentary committee, Minster for Agricultural Development Hari Prasad Parajuli and Agricultural Secretary Jaya Mukunda Khanal complained that the Finance Ministry and NRB didnâ€™t consult the ministry even though the programme was related to the farm sector. NRB officials present at the meeting said that the working procedure could be amended as necessary.
The Working Procedure has set the maximum limit for loans at Rs 10 million, but Minister Parajuli said that it should be ramped up to Rs 100 million with an eye on entrepreneurs engaged in large scale commercial farming.
Similarly, Secretary Khanal said that since the government had assured subsidised farm insurance, potential borrowers should be asked to buy coverage. â€œIf insurance coverage is made a prerequisite to get loans, there will be no risk to banks,â€ he added.
The president of the Nepal Bankersâ€™ Association said that banks were ready to issue credit if they can get assurances that the borrower is able to repay them.
The central bank introduced the Working Procedure in line with a provision in the governmentâ€™s budget for the current fiscal year. The plan, which went into immediate effect, has listed 12 agricultural areas as being eligible for the subsidised loans.
The areas include vegetable production, processing and storage; seed production, processing and storage; floriculture; livestock; fruits production, processing and storage; and dairy production, processing and sales.
Similarly, fishery, production and sales; mushroom production, processing and storage; animal slaughter house and meat business; herbal production, processing and storage; sugarcane, cardamom and ginger farming, storage and processing; and agriculture business are the other areas eligible for the subsidy.