Nepal Rastra Bank Offers Incentives for Energy Sector Investment

Nepal Rastra Bank has announced a series of incentives to encourage investment in the energy sector, particularly in hydropower projects.

According to the bank’s spokesperson, Guruprasad Poudel, the incentives include a special provision for single borrower limit, allowing banks to invest up to 50% of their primary capital in energy projects, compared to the usual 25% limit for other sectors.

The bank has also introduced a provision for energy bonds, which will enable banks to raise funds for energy projects. So far, commercial banks and development banks have invested around Rs 10-11 billion in energy bonds.

Additionally, the bank has introduced a provision for dedicated bonds for large projects, such as the Budhigandaki Hydropower Project, which will enable the project to raise funds from the bond market.

The bank has also reduced the loan loss provision for energy projects, which will reduce the cost of borrowing for energy companies. Furthermore, the bank has allowed for the capitalization of interest during the grace period for projects above 50 MW.

According to the Independent Power Producers’ Association of Nepal (IPPAN), the total financial commitment for hydropower projects in Nepal has reached around Rs 870 billion, with around Rs 500 billion already invested by banks and financial institutions.

The bank’s spokesperson stated that the incentives are aimed at encouraging investment in the energy sector, particularly in hydropower projects, which are crucial for Nepal’s economic development.