Nepal Rastra Bank Adapts Directives for Microfinance: Providing Relaxations for Merged Entities

The Nepal Rastra Bank (NRB) has recently instituted several modifications within the Integrated Directives of 2079, and has issued a circular in accordance with Article 79 of the NRB Act, 2058, to officially communicate these changes.

The amendments have been strategically introduced with the objective of offering regulatory relaxations to amalgamated "D" class financial institutions and microfinance companies.

These revised provisions will be applicable exclusively to merged microfinance firms that commence joint operations by Ashad 2081 or during the last  fiscal year 2079-80.

In addition, the Nepal Rastra Bank has taken further steps to address the financial concerns of borrowers affected by merger, amalgamation, and acquisition activities. Specifically, the central bank has implemented measures to ensure that the outstanding debts of borrowers, whose single customer credit limit has been exceeded as a result of such corporate actions, can be gradually aligned within the specified limit. This alignment will be facilitated in accordance with the borrowers' previous payment schedules, mitigating potential financial stress.

Previously, microfinance companies proposing dividends (either as bonus or cash) exceeding 15 percent were obligated to allocate 50 percent of the excess beyond 15 percent to the Reserve Fund, 35 percent to the Customer Protection Fund, and 10 percent for Corporate Social Responsibility (CSR) initiatives. Notably, the requirement for allocating 10 percent towards CSR activities has been temporarily waived for a period of one year from the date of commencing joint operations.