Laxmi Capital News
NRB expands definition of 'tourism' for lending

Nepal RastraBank (NRB) has redefined the tourism sector to enable more areas under thiscategory to get loans from bank and financial institutions (BFIs). 

The decisionmeans BFIs can now count their lending to broad areas of tourism sector underthis category. 

Issuing acircular to the BFIs last week, the central bank said that the new definitionof the tourism sector includes tour operator, healing center and massage spa.Similarly, BFIs can now count their lending to tourist residence, rural tourism,motel, home stay, resort and restaurant, eco tourism and wildlife reserve ascredits to tourism sector. 
Earlier, the definition of tourism sector for the purpose of bank lending hadnot included these areas. Bankers were long demanding that the central bankexpand the definition of the productive sector including tourism sector.  

The newdefinition of the tourism sector also includes adventure tourism activitieslike skiing, gliding, white water rafting, hot air ballooning, canoeing,parasailing, horse riding, elephant riding, bungee jumping, mountain climbingand sightseeing, among others. Similarly, BFIs can now extend loans to golfcourse, polo, pony trekking, trekking, mountain flight operation and cable car,under the category of tourism sector. Cultural, religious and sport tourismalso feature in the NRB's new list of areas that can be defined as tourismsector. 

The new moveof the central bank comes in the wake of the rise of bank lending in tourismsector amid rising number of tourist arrivals. The NRB has been prodding BFIsto increase their lending to priority sectors that include, among others,tourism, hydropower, agriculture, exports, and small and cottageindustries. 

The centralbank requires commercial banks to extend five percent of their total lending totourism sector. Apart from this, the NRB also provides refinance facility onloans extended to this sector. 

Bankers saythat the recovery in tourism sector has led to a rise in demand for loans intourism industry. Nepal welcomed 940,218 tourists -- a record high arrival --in 2017. Though the number was short of the target of welcoming one millionvisitors in a calendar year, the encouraging growth has made tourismentrepreneurs upbeat about the prospects of tourism sector in the coming years.

The buoyancyin the service industries, particularly tourism and hospitality, has also ledto expansion of businesses. The new rule of expanding tourist activities in newareas would also help BFIs to meet the mandatory requirement of extending fivepercent of their total loans to the tourism sector. 

Commercialbanks, so far, have been struggling to meet the priority sector lendingrequirement. As per the NRB requirement, BFIs must allocate at least 25 percentof their total lending to priority sector which includes a minimum of 10percent to agriculture, 5 percent to hydropower, and 5 percent to tourism andremaining to other priority sectors. 

Source: My Republica, 1st May 2018

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