NRB Amends Integrated Instructions Issued to Banks and BFIs; Now Commercial Banks are Permitted to Issue Agriculture Bonds

According to the Integrated Instruction, 2078 given to banks and financial institutions of the "A," "B," and "C" categories regulated by Nepal Rastra Bank (NRB), Section 79 of the Nepal Rastra Bank Act, 2058 has revised and published the integrated instructions. The salient points of the directive as amended are as follows:

• Banks and financial institutions should develop a system and infrastructure to classify bad loans.

• Assets are revalued for the purpose of calculating the debt-to-equity ratio (80:20), and the revaluation performed to demonstrate self-funding should be done in accordance with accounting standards.

• The aforementioned loan shall not be regarded as having been restructured or rescheduled if the grace period has been extended in accordance with the modified COD of the financial projects.

• The terms restructuring and reclassifying are distinct. If the customer's ability to repay the loan declines, restructuring and rescheduling may be done. Reduced ability to repay debt is attributed to cost overruns, cash flow inconsistencies, and the process of being delisted from the stock exchange.

• At the time of restructuring or rescheduling, a minimum of 12.5 percent loan loss shall be provided if the loans are undertaken for the first time, in other cases, in case of restructuring and/ or rescheduling, at least 25% loan loss must be arranged.

• Personal loans up to Rs. 15 lakhs now have a 7-year payback term instead of the previous 5-year one.

• It has been added that the same property cannot be appraised by the same appraiser more than once when selling non-banking property.

• Banks and financial institutions have removed the management of subsidized loans that must be provided per branch.

• The system of lowering the credit rating of loans worth more than Rs. 50 crores every two years has been abolished.

• Pictures of natural person cannot be published alongside notices for debt collection, per an arrangement.

• The associated tax filing/payment certificate from the income has been included over the course of the loan to raise the borrower's payment income ratio annually.

• Detailed institutional details of the expenditure incurred on CSR should be published through the website within one month of completion.

• Institutional fixed deposits must be opened for a minimum of six months, and it is prohibited to make premature deposits before that time.

• The licensed institution must only open an account after verifying that the depositor is not on the blacklist according to the information provided by the credit information center before opening any accounts.

• Previously only Agricultural Development Bank was allowed to issue agriculture bond, now all seasoned commercial banks are permitted to issue agriculture bonds. However, within three years, this sum needs to be transferred to the appropriate areas. 30 percent in the first year, 60 percent by the second year and the entire amount by the third year.

• Institutional term deposits for periods shorter than six months are not acceptable. Additionally, no sum may be paid out early or returned before the fixed deposit's initial six months have passed.