Following the Nepal Rastra Bank's (NRB) decision to tighten lending policies to the deprived sector, banks and financial institutions have decreased their investments in this category.

Over the past year, loans disbursed to the deprived sector have declined by approximately 5.5%. In mid-January 2024, banks had disbursed Rs 318 billion under deprived sector lending, which decreased to Rs 301 billion by mid-January 2025. Additionally, there was a 3.3% reduction in such loans from mid-July 2024 to mid-January 2025.

NRB mandates that banks and financial institutions allocate a minimum of 5% of their total loans to the deprived sector. These loans are typically disbursed directly by banks or through microfinance institutions.

The deprived sector includes low-income and socially marginalized groups such as women, indigenous people, Dalits, differently-abled individuals, marginalized communities, small farmers, artisans, laborers, and landless families. Loans up to Rs 300,000 for renewable energy, Rs 150,000 for foreign employment, Rs 400,000 for cold storage and agricultural infrastructure, Rs 200,000 for technical education, amounts given to the Youth and Small Entrepreneurs Self-Employment Fund, and loans up to Rs 10 million taken by community hospitals in rural areas also fall under this category.

In February 2023, NRB issued a directive prohibiting individuals from taking loans from more than one microfinance institution and barring bank borrowers from obtaining loans from microfinance institutions. Although this provision was amended in July 2024 to allow individuals to borrow from up to two microfinance institutions, the restriction on obtaining loans from both banks and microfinance institutions simultaneously remains in place.

Additionally, since February 2023, NRB has set a limit of Rs 500,000 for loans taken under collective guarantee and Rs 700,000 for loans with collateral. Previously, individuals could obtain loans of up to Rs 700,000 under collective guarantee and Rs 1.5 million with collateral.

Ram Bahadur Yadav, president of the Nepal Microfinance Bankers Association, stated that the tightening of rules on double borrowing and the reduction in loan limits by NRB have led to a decrease in loans disbursed to the deprived sector. He also noted that loans taken from banks have decreased as microfinance institutions struggle to expand their business.

In response to public protests against microfinance institutions, NRB formed a committee under the coordination of Executive Director Dr. Prakash Kumar Shrestha to study the issues. Based on the committee's suggestions, NRB has been tightening microfinance lending practices. In late December 2024, NRB issued guidelines for microfinance institutions and directed regular monitoring of customer loan utilization.

According to NRB, the overall credit flow of banks and financial institutions increased by 5.2% as of mid-January 2025 compared to mid-July 2024. The total credit flow rose from Rs 5,167 billion in mid-July 2024 to Rs 5,435 billion in mid-January 2025. During this period, loans for imports saw the highest increase at 56.6%, while margin loans increased by 26.3%, and overdraft loans decreased by 9.8%.