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The Nepal Stock Exchange (NEPSE) gained 33.57 points to close at 2,080.38 points on Wednesday. Similarly, the sensitive index surged by 4.81 points to close at 396. 34 points. A total of 4,779,796 unit shares of 269 companies were traded for Rs 1. 80 billion. Meanwhile, Liberty Energy Company Limited was the top gainer today, with its price surging by 9. 80 percent. Adarsha Laghubitta Bittiya Sanstha Limited was the top loser as its price fell by 10.00 percent. At the end of the day, total market capitalization stood at Rs 3. 00 trillion.

As a series of anomalies come to light, Nepal Rastra Bank plans to tighten its grip on microfinance institutions (MFIs). Of late, MFIs have been embroiled in controversies with issues of multiple lending, and high-handedness adopted for loan recovery. The central bank has now said that it will introduce a provision whereby one person cannot take loans from multiple MFIs. In addition to this, the NRB is also planning to cap the dividends of the MFIs. Revati Prasad Nepal, who heads the Microfinance Institutions Supervision Department at NRB, says the central bank is preparing a policy that will prohibit borrowers from taking loans from multiple MFIs. While the central bank had introduced a policy of discouraging multiple banking five years ago, it could not be implemented effectively. The central bank had directed the MFIs that they should grant loans only after ensuring that borrowers have not taken loans from more than one institution. And, such loans should be within the limit as prescribed by the central bank. MFIs can grant loans up to Rs 700,000 without collateral and Rs 1.5 million with collateral. Later, the central bank introduced a provision, whereby MFIs have to do 100 percent provisioning if the loans exceed the limit. However, the issue of taking loans from multiple MFIs continued. Nepal said that the central bank will introduce provisions immediately to discourage this trend. "The problems we have now are due to the micro-finances providing loans beyond the specified limits. We are now planning to tighten the credit flow," said Nepal. The central bank officials are of the view that there should be a cap on the dividends of the MFIs. "The basic principle of microfinance is to offer financial services in rural areas to financially vulnerable individuals and small businesses that don’t have access to traditional lending resources," said an NRB official, "However, with the surge in the number of microfinance companies, they have become more profit-oriented." As MFIs have deviated from their basic principle, the NRB is of the view that there is a need to limit their dividend distribution. However, NRB officials said the Banks and Financial Institution Act (Bafia) should be amended for this. "If there is a need for such intervention, the central bank will move toward this direction," he said. "The current mess in the microfinance sector is a result of micro-finance companies operating as commercial banks." Loan recovery became complicated for micro-finance institutions as their primary lenders—micro and small enterprises—were badly affected by the Covid-19 pandemic. There have been cases were borrowers either committing suicide or absconding from villages after failing to pay exorbitant interests of the MFIs, who have been charged of using coercive measures to recover their loans. According to microfinance expert Dr. Man BK, the microfinance sector landed in trouble as it operated beyond its principles. "The microfinance sector in Nepal was run under a corporate model when it should have been run under a community financing model," he said. BK argues that both commercial banks and microfinance institutions are being run under the same model. "The regulator has allowed MFIs to be listed in the stock market and also given free hand when it comes to dividend distribution," said BK.

With Indian assurance of allowing power export from Nepal to Bangladesh, the Nepali authority is planning to export the electricity generated from Likhu-4 Hydropower Project to Bangladesh. According to a senior official at the Ministry of Energy, Water Resources and Irrigation, preparations have begun for project selection after the Indian government agreed to allow Nepal to use its transmission infrastructure to export 50 megawatts of electricity to Bangladesh. During the 10th joint secretary-level Joint Working Group and the secretary-level Joint Steering Committee meeting held in Jaipur, India on February 17-18, India agreed to grant its approval once Nepal submits the proposal along with the project whose power will be sold to Bangladesh. According to Energy Ministry officials, India promised to give approval according to the Indian government's Electricity Import-Export Directive. The Nepali side has proposed that the electricity from the Likhu-4 project could be exported to Bangladesh. According to Madhu Bhetuwal, spokesperson of the Energy Ministry, Indian assurance is very important symbolically. The Indian decision, according to Nepali officials will be a milestone for opening the door for trilateral cooperation in energy trade among Nepal, India, and Bangladesh as well as regional trade in the long run. Nepal and Bangladesh in August last year had decided to request the southern neighbor to allow the export of 40-50MW of Nepali electricity to Bangladesh in the initial phase by using the high-voltage Baharampur-Bheramara cross-border power transmission link. Earlier, in December last year, the Indian side had told Nepali officials that electricity export from Nepal to Bangladesh through the Baharampur-Bheramara cross-border power transmission line was not immediately possible. Nepali officials were told that there was a transmission constraint in the Baharampur-Bheramara transmission line. India's cooperation is vital for power trade between Nepal and Bangladesh, as there is no separate dedicated transmission line to export electricity between Nepal and Bangladesh. According to Nepali officials, since the Likhu-4 project is a joint venture between Nepali and Indian companies and an Indian contractor was involved in the construction, the southern neighbor will give the green signal to export power from this project. The Likhu-4 Project was developed by Nepal's Triveni Group and India's Bhilwara Energy. Located on the border of Okhaldhunga and Ramechhap districts, the project started its commercial production last year. Bangladesh has been keen on importing electricity from Nepal as well as developing hydropower projects in Nepal on a joint-venture model in recent years. The 683 MW Sunkoshi 3 hydropower project is one such project that Bangladesh is looking to develop under a joint venture arrangement.

Indian officials have raised concern over the Supreme Court's decision to issue an interim order staying the government’s decision to extend the deadline for GMR Energy to complete the financial closure of the 900-megawatt Upper Karnali Hydropower Project. The interim order has thrown the project’s future into uncertainty as GMR won’t be able to work towards financial closure now. Financial closure means ensuring enough resources to implement the project. GMR in mid-November last year had filed a petition to vacate the stay order, arguing that the court’s decision would further delay the project works. In response Supreme Court justice duo Kumar Regmi and Til Prasad Shrestha on Jan 3 forwarded the dispute of the Upper Karnali Hydropower Project to the constitutional bench, citing concerns about constitutional interpretation. With the license of the major hydropower project funded by a leading Indian company hanging in the balance, the Indian officials are concerned about the situation. During his recent Nepal visit, Indian Foreign Secretary Vinay Mohan Kwatra had also raised the issue with the Nepali officials. “When he met with Deputy Prime Minister and Minister for Energy, Water Resources and Irrigation Minister Rajendra Lingden on February 14, he had asked about what was happening with the Upper Karnali project,” said a senior official at the Energy Ministry. “We notified the Indian foreign secretary that the Nepal government has owned up the issue and already demanded the court to vacate its interim order.” The official said that they also notified the Indian foreign secretary that the government has responded to the court, saying that as the Indian company was preparing to sign a power purchase agreement with Bangladesh, the deadline extension for financial closure was necessary. Indian government officials also raised the issue during the 10th joint secretary-level Joint Working Group and the secretary-level Joint Steering Committee held in Jaipur, India on February 17-18. They were concerned about the investment climate for India-invested projects in Nepal, according to one Nepali delegation member. “While they didn’t specifically focus on the Upper Karnali project, it was clear to understand that they were  hinting at the problem faced by GMR Energy,” said the delegation member. Citing a number of reasons, a single bench of Justice Ishwar Prasad Khatiwada had issued the interim order not to implement the decision until the final verdict on the matter. The Supreme Court’s interim order came at a time when the Indian company was preparing to sign a trilateral power sales agreement with the Bangladesh Power Development Board and NTPC Vidyut Vyapar Nigam Limited (NVVN). Bangladesh signed a memorandum of understanding with India’s NVVN to import electricity from the Upper Karnali project via India during Bangladeshi Prime Minister Sheikh Hasina’s visit to New Delhi in April 2017. Bangladesh has already issued a letter of intent to GMR Group expressing its interest to enter into a contract to purchase 500 MW of electricity from Upper Karnali. The power purchase agreement rate was also agreed upon between GMR Energy and the Bangladeshi authority at 7.712 cents per unit for a period of 25 years. However, the court issued an interim order based on the lack of the continuation of deadline extension since its deadline was last extended on November 10, 2017, for one year. “After the expiry of the deadline, no decision was taken to continue the agreement,” the court observed. “In the context where the last deadline expired three years ago and there has been no other extension, there is no logical justification to extend the deadline by two years from July 15 this year.” Officials at the Investment Board Nepal admit that indecision on the part of the board on extending the deadline as demanded by the Indian company was the main reason why the issue reached the Supreme Court. “The Indian company failed to accomplish the financial closure in time,” a lawyer with knowledge of the matter said. “The Investment Board also failed to take timely decisions on the extension which has now cast doubt on the future of the project.”