Everest Bank slashes interest rate on Home Loans

KATHMANDU, MAY 03 -
Everest Bank is providing home loans at a minimum interest rate of 10 percent to customers planning to buy homes at the NLHDA Kantipur Real Estate Expo which started in Kathmandu on Thursday. The Nepal Land and Housing Developers' Association (NLHDA) and Kantipur Publications are  the organisers of the event.

The bank's usual interest rate for home loans is 10.5 percent. The bank said it would provide loans at 10 percent interest for up to five years, 10.5 percent from five to 10 years and 11 percent from 10-15 years. Similarly, Standard Chartered Bank Nepal is providing home loans at 9.49 percent interest during the expo with a 0.5 percent concession on the service charge.

Banks and financial institutions (BFIs) which are still reluctant to lend to real estate developers are increasing their lending to end users. Laxmi Bank, NIC Bank and Himalayan Bank, among others, all have brought down the interest rate to 10-12 percent. Under home loans, they offer credit to purchase land, construct homes or buy apartments.

"As home loans are provided based on the income assessment of an individual, there is no risk at all as long as the assessment is good," said Diwakar Poudel, corporate affairs chief at Standard Chartered. "The home loan portfolio is exciting, attractive and inspiring. We see a good future in this sector," he added. Standard Chartered currently has a 25 percent exposure to home loans.
Likewise, Everest Bank's chief executive officer PK Mohapatra said his bank had given high priority to home loans. During last Dashain, the bank provided home loans at a fixed interest rate of 9.99 percent for three years.

However, BFIs have been reluctant to lend to developers despite continued lobbying by them citing risks highlighted by the crisis in the sector in the last four years. "We are much conservative in providing loans to the real estate sector," said Mohapatra whose bank's lending to the pure real estate sector amounts to Rs 2 billion.

However, developers say that despite reluctance on the part of banks to lend to developers, home loans have helped them too. "Those wishing to buy apartments are getting loans which has helped to clear stocks of unsold apartments," said Min Man Shrestha, general secretary of the Nepal Land and Housing Developers' Association. He added that banks would have to lend to developers after all the apartments and housing units currently under construction are sold.

With the central bank increasing the threshold of realty loans to Rs 10 million, a majority of apartment projects could be sold with bank financing, according to developers. Shrestha said a majority of apartments available have price tags of below Rs 10 million which can be sold.
According to the NLHDA, from April 2005 to March 2013, around 65 apartment projects having 6,330 apartment units were implemented. Of the total, 12 apartment projects have acquired completion certificates, making 870 units of apartments ready to move in for buyers, according to realty developers. There are around 1,200 stand-alone housing projects going on currently, according to realty developers. Since the central bank capped realty lending at 25 percent, BFIs have been reducing their exposure to the realty sector.

BFIs have lent Rs 88.19 billion to the realty sector as of mid-February, down from Rs 98.81 billion one and a half years ago, according to Nepal Rastra bank (NRB). This is close to 10 percent of the total loan portfolio of BFIs. As of mid-February this year, BFIs had lent a total of Rs 882.31 billion.
Commercial banks have the highest lending to the realty sector with Rs 65.63 billion, followed by development banks with Rs 12.29 billion and finance companies with Rs 10.27 billion. "Lending to the realty sector came down due to both recovery of loans and NRB's increasing the threshold of real estate loans," said NRB spokesperson Bhaskarmani Gnawali.

Many financial institutions that landed in trouble in recent years had a history of overexposure to the realty sector besides bad corporate governance. However, Gnawali said that the situation had improved much in recent days. "The current situation of the realty sector is satisfactory. Houses and apartments are being sold after developers reduced prices," he added.

 Meanwhile, Sashin Joshi, chief executive officer of NIC Bank, said that there was no panic situation in the sector like until last year. "Borrowers have been repaying their loans by selling their other properties," he said.

Developers said that there was growing demand for low-cost apartments, and that banks' increased interest in lending to end users was helping the sector to recover. They added that they had been selling apartments with fewer facilities but at affordable prices for this reason.

"We ran after various facilities in the past which increased the cost of the apartments," said Shrestha. "Now we have realised that we should focus on affordability."

The central bank, however, had long been asking developers to slash prices so that apartments could be sold. "Apartments in the price range of Rs 1.5 million to Rs 5 million are affordable for Nepalis," said Gnawali. "The housing expo's focus on affordability is praiseworthy."

Source: ekantipur.com, 3rd May 2013

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OMA Emirates launches subsidiary in Nepal

OMA Emirates — a leading global business solution provider in the Middle East — has announced the launch of its subsidiary OMA Nepal.

With the launch of OMA Nepal, the company based in Dubai brings its wide range of product and service offerings to the financial sector of Nepal, said group chief executive of OMA Emirates Niranj Sangal, here today.

The company provides cutting edge technology solutions in the area of card personalization, payment issuance and payment acquiring systems through a global delivery platform, he said, adding that the company has provided its service to Himalayan Bank in Nepal.

The pioneer of payment solutions of the Middle East has successfully completed the NanoSwitch for Himalayan Bank.

NanoSwitch is a fully integrated banking Switch and Card Management System (CMS) that is capable of managing ATM and Point of Sales devices and acts as the central interface for all payment and banking activities.

“With our in-house team of qualified and creative software developers, we provide a full fledged and flexible system that takes cognisance of the entire issuance and acquiring requirements of Himalayan Bank,” chief executive of OMA Emirates Niranj Sangal added. “Moreover, our indigenous solution is highly cost effective from the financial aspect of the project.”

“As one of the most prominent banks in the country, we have an ongoing need to modernize our banking systems and lead the way for other financial institutions,” said chief executive of Himalayan Bank Ashoke SJB Rana, on the occasion.

“The bank looks forward to a rewarding experience in our partnership with OMA Emirates in creating an indigenous NanoSwitch solution,” he said, adding that the complete guidance extended by OMA’s highly skilled professionals and ease of installation met the bank’s clear cut requirements.

“The implementation of the new system — that cost the bank $300,000 — will be completed by mid-March,” Rana said.

OMA Nepal is dedicated and fully committed to serving the different industries including the banking and finance sector of Nepal, according to the company.

“With OMA Emirates drawing huge success across several markets in the Middle East, Europe and Asian subcontinent, the company looks forward to attaining the same with the launch of its subsidiary OMA Nepal, in the country,” the company said.

OMA also plans to launch a full-fledged support, and Research and Development (R&D) centre to provide end-to-end service to its customers as it is aiming at providing Business to Consumer (B2C) services. “Its facility shall also provide support services to East Asian countries.”

Source: The Himalayan Times (Feb 4th, 2013)

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New NRB Rule-Nepal might experience increased remittance inflows

Remittance inflow might see an increase as commercial banks can now open a liaison or representative office outside the country.

Commercial banks that have fulfilled the basic criterion according to the central bank’s rule can now open a representative or liaison office outside the country, Nepal Rastra Bank (NRB) said today.

They must, however, have minimum basic paid up capital, been maintaining one per cent more buffer capital since the last one year, have Non Performing Assets of less than five per cent for the last three years, and the central bank must not have penalized any of the directors within the last six months.

Those commercial banks that fulfill the criterion must first apply at the central bank with financials of the last three years, declaration of its capacity to abide by the regulation of the regulatory authority of the concerned country where they are willing to open a representative or liaison office, besides a feasibility study and the bank’s board decision, said Nepal Rastra Bank that will permit banks with time restriction, if the applicant fulfills all the criteria.

Commercial banks must get approval from the concerned country’s regulatory authority within six months and a final approval from the central bank to open a representative or liaison office that must come into operation within six months and they must inform the central bank.

“Commercial banks must take approval from the Foreign Exchange Department of the central bank for the foreign currency needed to open an office in a foreign country,” NRB added.

Commercial banks have been asking the government and the central bank to allow them to operate offices outside the country.

Some of the commercial banks have, even, been planning to open a liaison office in the key remittance originating countries like India to officially channel in remittance through banks. Though a World Bank report has projected remittance inflow growth rate to slow down, a large chunk of remittance inflow from India has not yet been completely utilized through formal banking channels making it difficult to track its contribution to the total remittance.


Recently, Global IME Bank had sought the central bank’s permission to open a liaison office in New Delhi, India, to channel the remittance inflow through the bank.

The Monetary Policy has also promised commercial banks to allow them to open offices outside the country, though earlier, the Unified Directives 2010 had allowed only licensed institutions established with foreign equity participation to open a liaison or representative office according to the conditions stipulated by the central bank.

Source: The Himalayan Times (Jan 31st, 2013)

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