Explained: Major Highlights of NRB's New Policy Revision for Banks and Financial Institutions

Nepal Rastra Bank has issued a circular to implement the policy provisions mentioned in the quarterly monetary policy review. The provisions and effects of this circular are as follows:

1. The personal loans of debtors with income sources from the extreme and moderately affected areas can also be restructured and rescheduled. This has brought relief to the customers of personal loans and will also facilitate the banks in managing bad loans. However, banks may not want to use this provision as much as possible due to the 5% loan loss provision.

2. The total limit of non-disclosed personal OD loans (total loan amount from all institutions) is kept at Rs. 50 lakhs. As of now, debtors could utilize the loophole and take Rs. 50 lakhs from each institution. From now on, the total loan amount from all institutions can't exceed Rs. 50 lakhs. If a debtor has taken loans in this way, they are required to clear the loan amount by Ashad 2078.

However, there is no limit to purpose-disclosed loans and term loans.

3. Corona-affected debtors are protected from being blacklisted for 6 months and the banks are not allowed to claim the collateral within that timeframe. This postponement will be till Ashad 2078. This provision might be taken as a relief package for debtors affected by the pandemic.

4. Practical modifications have been made for the smooth flow of Gold, Silver, FD, and Government Securities loans. This is also applicable to Credit Card Loans and Digital Loans of up to Rs. 2 lakhs.

5. Banks will have to bring the difference between the minimum interest rate of savings account and the maximum interest rate of term savings on interest-paying accounts to 5%. This arrangement has further lowered the interest rate on fixed deposits.

6. The interest rate of the loans at a fixed interest rate can be reviewed in 7 years for the first time. The rates can then be revised every 5 years.

7. Some points have been added in the margin lending loan to clarify and give uniformity to the arrangements in the internal working procedures of the bank. This has not affected the credit flow limit and credit management.

Importantly, Margin lending is prohibited for the shares of companies that do not conduct timely AGM from the last 3 years, those that are at a loss, and those that have just come into operation and have not traded in NEPSE for 250 days.