How do banks and financial institutions decide if you’re eligible for a loan? Until now, eligibility has largely been determined by the loan’s purpose, the borrower's ability to repay in instalments, and strong collateral—usually real estate. But this approach is set to change, as banks will soon start using credit scores as a key factor in evaluating loan applications.
Nepal Rastra Bank (NRB) is preparing to implement a credit scoring system that will serve as a primary basis for determining an individual’s loan eligibility. NRB spokesperson Ramu Paudel said the central bank is currently analysing the legal and policy requirements, technical infrastructure, regulatory framework, and international practices necessary to introduce credit scoring in Nepal. Once the foundation is in place, the system will be rolled out in phases.
This initiative was first announced in the monetary policy for Fiscal Year 2023/24, where NRB stated that it would work with relevant agencies to develop the credit scoring mechanism. The Credit Information Bureau has now been tasked with leading this development.
“We’ve assigned the Credit Information Bureau to carry out the necessary studies and groundwork,” said Paudel. “We’re also coordinating with banks, financial institutions, and other stakeholders. However, it will take time, as we need to build both the legal and technical infrastructure.”
The High-Level Economic Reforms Advisory Commission has also recommended introducing a credit scoring system. It highlighted the current overreliance on real estate as collateral, which forces borrowers to invest in land just to qualify for loans. A credit scoring model, the commission said, would help banks assess unsecured loans based on a borrower’s financial behaviour and reliability, making the lending process more flexible and inclusive.
The Credit Information Bureau has already begun preliminary work. According to its spokesperson, Bijay Kunwar, the bureau currently provides credit scores to banks based on existing loan data. “We have credit data on individuals and generate scores based on that. But to build a comprehensive system, we also need access to other financial obligations—such as income tax, utility, and telecom payments—which requires a supporting legal framework,” he said.
NRB has already made credit ratings mandatory for companies seeking loans of over Rs 500 million. These ratings are currently provided by agencies such as ICRA Nepal, CARE Nepal, and Infomerics. As of mid-March 2025, around 1.937 million individuals and businesses had taken loans from banks and financial institutions. Of the total loans issued, 65.2 percent were backed by real estate collateral, while 14.5 percent were backed by current assets such as agricultural and non-agricultural goods.
What Is a Credit Score?
A credit score is a numerical measure of a person’s creditworthiness, derived from their credit history and overall financial behaviour. It helps banks assess a borrower's ability to repay loans and gauge the level of risk involved.
To generate a meaningful credit score, data is required not only on a borrower’s payments to financial institutions but also on other obligations such as income taxes, electricity, water, internet, and telephone bills. According to Kunwar, individuals who pay their dues on time are assigned higher scores, which banks then use to make lending decisions.
