Money & Finance
The Nepal Rastra Bank (NRB) has amended the working capital loan guidelines, giving businesses more than two years to adjust loans exceeding the limit.
According to the central bank, the guidelines that came into effect on October 18, 2022 have been revised based on suggestions from banks, financial institutions, and industrialists.
The NRB move came a day after Prime Minister Pushpa Kamal Dahal discussed the matter with Deputy Prime Minister and Finance Minister Bishnu Paudel and Governor Maha Prasad Adhikari. During the discussion, Dahal had instructed the governor to amend the guidelines.
The private sector had been putting pressure on the government and central bank to change the guidelines on working capital loans.
Kiran Pandit, director of the NRB's Banks and Financial Institutions Regulation Department, said that the revised guidelines added new rules so that old loans cannot be re-loaned or rescheduled and can be paid back as periodic loans.
According to the new rule, businesses that have borrowed more than the maximum allowed by the working capital loan guidelines have been given until mid-July 2025 to pay back their loans.
The revised guidelines allow businesses with loans exceeding the working capital limit to repay the loan in five installments by mid-July 2025.
Those who have borrowed more than the specified limit will have to pay 10 per cent by mid-June 2023. After that, installments of 20 per cent each are to be paid every six months. According to a revised clause, borrowers must now pay 30 per cent of the final installment by mid-July 2025.
The BFIs are not allowed to charge additional fees if the borrower pays back the working capital loan on time. This arrangement will not be necessary, though, if the loan is transferred to other banks and financial organisations.
The rule will not apply to a working capital loan of up to Rs10 million, up from the previous limit of Rs5 million. However, short-term loans will not be renewed.
This arrangement will come into force after six months, the NRB said in a statement.
Banks can disburse fixed-rate loans regularly for working capital needs for a period of 3-10 years. Also, the business financial statement requirement for working capital loans has been lowered from five years to three years.
If a borrower needs an emergency ad hoc loan more than once in a fiscal year, the BFIs may give out a loan with the approval from the BFI board.
The monitoring and management provisions of the working capital loan guidelines have also been amended. The BFIs are required to do four inspections in total, once every three months and once every year in case of an emergency.
