Life Insurers Disburse Rs.68 Billion Loan to Policyholders Amid Liquidity Crunch in the BFIs

Kathmandu: There has been a lot of attraction in the loan against the collateral of life insurance policy among policyholders amid the ongoing liquidity crunch in the bank and financial institutions(BFIs).

According to the unaudited 4th quarter report of last fiscal yeas 2078-79, policyholders have received Rs. 67.70 billion loan against the collateral of their life insurance policies till last fiscal year. Till the previous financial year, such loan was Rs. 51.83 billion only. The loan amount has been increased by 30.61 percent in the last fiscal year.

The insured can get a loan at the interest rate of 9 to 11 percent against the surrender value of a life insurance policy. In the current situation, the interest rate is lower than the average market interest rate offered by BFIs amid liquidity crunch. The ongoing market interest rate for personal loan ranges from 13 to 15 percent.

The policy loan’s interest is payable semi-annually otherwise compound interest will be charged to the policyholders.

It has been found that among the life insurance companies, Nepal Life has invested the Rs. 24.76 billion against policy loan. Second most LIC Nepal has disburse policy loan of Rs. 18.11 billion.

In terms of amount, it seems that there is more flow in old insurance companies, while in terms of percentage, the growth rate of new companies is higher for policy loan. Sanima Life Insurance has expanded the loan disbursement of Rs. 3.29 crore to Rs. 14.18 crore within a year on last fiscal year.


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