Nepal Rastra Bank Implements Business-Friendly Approach: Softens Joint Venture Blacklisting Policies
Nepal Rastra Bank (NRB) has issued a circular today embracing a more lenient stance concerning the blacklisting of businesses engaged in joint ventures (JVs).
Prior to the monetary review, the NRB had issued an instruction, stating that companies within the same joint venture (JV) should not face blacklisting solely because a partner firm has been blacklisted. Previously, investors with over 15 percent shareholding were subject to blacklisting, leading to the suspension of various construction projects.
For instance, Sharma & Sharma Construction's JV company faced blacklisting after the primary company's cheque bounced, affecting partner companies and causing work stoppages. Critics argued that this policy was not conducive to a business-friendly environment.
Responding to the concerns, the NRB, in its latest amendment, ensures that the deposit accounts of other companies in the JV will not be frozen, providing relief to businesses previously affected by blacklisting.
The NRB has also introduced changes in the rules pertaining to loan guarantors. Previously, there was a requirement to give a 35-day notice to the first guarantors for loan repayment, after which they could be directly blacklisted. The recent amendment mandates the auction of the debtor's property before blacklisting the guarantor. If the auctioned property covers the outstanding amount, blacklisting can be avoided.
Furthermore, if the mortgage does not fully recover the owed amount, the guarantor must be given a generous 90-day period to settle the remaining balance before facing blacklisting. This revision aims to protect individuals from immediate financial and social consequences associated with blacklisting, such as the suspension of social security allowances and pensions.
Simultaneously, the NRB has issued a circular emphasizing that individuals, firms, or companies included in the blacklist will not be allowed to open accounts or engage in banking transactions. However, for essential daily expenses and withdrawals up to a specified limit, funds can be accessed. Additionally, funds received from government grants and subsidies, provided by various levels of government, can be withdrawn up to a certain limit.
