NRB Issues Circular to Implement New Monetary Policy Provisions

Nepal Rastra Bank (NRB) on Tuesday issued circulars to banks and financial institutions directing them to implement the new provisions introduced through the first quarterly review of the monetary policy for the current fiscal year.

The central bank revised several policy measures through the review. Under the new provision, loans disbursed to businesses in disaster-affected districts, including Ilam, following floods and landslides can be restructured at the borrower’s request. Banks and financial institutions must assess the borrower’s cash flow and income and recover at least 10 percent of the interest payable before completing the restructuring by mid-April.

NRB has also mandated that loans undergoing restructuring or rescheduling must retain at least the same loan classification category as previously assigned, along with the corresponding loan loss provisioning.

Likewise, banks and financial institutions can now extend personal loans of up to Rs 10 million for unspecified purposes, including overdraft facilities. If the lending exceeds the prescribed limit, institutions must maintain a 100 percent loan loss provision on the excess amount, according to the central bank.

In addition, NRB has fixed the interest rate on loans provided to licensed institutions as per prevailing laws at 5.75 percent, down from the earlier rate of 6 percent.

The central bank has also introduced new provisions on loan rescheduling and restructuring for ‘Class D’ financial institutions. These institutions can now provide microloans of up to Rs 1.5 million per individual for operating agriculture, micro-enterprises or businesses against acceptable collateral, regardless of whether the borrower is affiliated with a low-income group.

Previously, such loans were capped at Rs 700,000. For members affiliated with a group, only one type of loan—either a group-based loan or a collateral-based loan—can be extended at a time. -- RSS