New NRB measures on gold loans

KATHMANDU, SEP 27 -

With rising trend of traders giving loans to individuals accepting gold and silver as collateral and again taking loans from banks and financial institutions (BFIs) against the same metals, the Nepal Rastra Bank ( NRB ) has put in place stringent measures against such a practice.

In a new directive issued on Thursday, the central bank has told BFIs to provide loans against gold and silver only after confirming easy recovery. “While accepting such gold and silver as collateral, BFIs should confirm that they are in a single basket,” states NRB circular.

If BFIs are found to have taken multiple baskets of gold and silver or several small baskets in bigger single basket as collateral for extending loans, they will have to make 100 percent provisioning of such loans, according to NRB .

NRB Spokesperson Bhaskarmani Gnawali said the move was taken to address the risk posed by the practice of middlemen taking loans from BFIs instead of the actual owners of the metals. He said traders extending loans is itself illegal.

While providing loans to the people of municipalities against houses within the municipality, the central bank has asked BFIs that they confirm whether the loanee has fulfilled the required standard set by the authorities.

BFIs have also been told to seek the detailed documents like approval for building construction.

Source: The Kathmandu Post