Kathmandu: Nepal Rastra Bank (NRB) has issued a new circular directing banks and financial institutions (BFIs) to implement the provisions announced in the first quarterly review of the monetary policy for the current fiscal year.

The central bank has introduced new amendments, additional measures, and relaxations aimed at supporting borrowers and strengthening credit management.

Loan Restructuring for Flood-Affected Districts

NRB has instructed BFIs to restructure loans issued to enterprises and businesses in flood-affected districts, including Ilam, based on borrowers’ requests. While restructuring:

-Banks must assess the borrower’s cash flow and income conditions.
-At least 10% of the payable interest must be recovered, depending on need and justification.
-Restructuring must be completed by Chaitra-end of the current fiscal year.

Restructured loans must remain in at least the same loan classification category and BFIs must maintain the required loan loss provisioning.

Limit Raised on Personal Loans
BFIs can now issue personal loans of up to Rs 10 million for unspecified purposes, including overdraft facilities.

NRB has cautioned that if BFIs lend beyond this limit, they must maintain a 100% loan loss provision on the excess amount.

Additionally, the interest rate on loans extended to licensed institutions under existing laws has been reduced from 6% to 5.75%.

New Rules for ‘D’ Class Financial Institutions

NRB has revised provisions for rescheduling and restructuring loans issued by microfinance institutions:

-Microfinance institutions can now provide loans up to Rs 1.5 million per person, up from the previous limit of Rs 700,000.
-These loans must be issued against acceptable collateral and must specify the purpose—agriculture, small enterprises, or business activities.
-Only one loan or collateral-based loan can be disbursed to a member of a group at any one time.

The latest directives aim to enhance access to finance, support disaster-affected regions, and tighten credit discipline across the banking system.