Nepal Rastra Bank (NRB) is set to broaden access to digital loans for micro, small, and medium-sized enterprises (MSMEs), moving beyond the current focus on salaried individuals with regular income. Under the revised guidelines, banks will be permitted to offer digital loans of up to Rs 500,000 to customers with salary-linked accounts and up to Rs 200,000 to other borrowers.

The central bank announced the policy shift in its monetary policy for the upcoming fiscal year (FY) 2025/26, unveiled on Friday. As part of this move, NRB will amend existing procedures to enable MSMEs to access digital credit, aligning with the growing trend of digital transactions in Nepal. A senior official from NRB’s Payment Systems Department confirmed that the reforms are aimed at extending the reach of paperless, collateral-free, app-based loans to business owners who were previously excluded.

Nepal introduced digital lending in 2021 under the “Guidelines on Digital Loan Disbursement, 2021,” which allowed banks and financial institutions to provide loans through electronic channels. These loans, typically processed entirely via mobile banking applications, offer a streamlined experience from application to disbursement. Despite their popularity among individual users for emergency needs such as healthcare, travel, or household expenses, challenges in loan recovery have emerged.

Following NRB’s initial guidance, local fintech company F1Soft launched the "Phone Loan" service, enabling commercial banks to offer instant, unsecured loans through mobile platforms. Till date, ten commercial banks have issued over Rs 8.5 billion in digital loans to more than 342,000 customers.

The upcoming reforms aim to leverage this infrastructure for business lending as well. The process involves customer application via mobile banking, automated credit assessment using decision analytics software, and near-instant fund transfer to the borrower’s bank account.

The expansion of digital credit comes as electronic payments continue to rise sharply in Nepal, particularly since the COVID-19 pandemic. From everyday purchases to government revenue payments, digital transactions are becoming more prevalent. The central bank’s decision reflects its broader commitment to integrating digital tools across the financial ecosystem, including in credit delivery.