NRB Has Amended and Added Various Facilities To the 'A', 'B' and 'C' Category Banks and Financial Institutions; List of Major Highlights of NRB Circular

Wed, Aug 3, 2022 2:08 PM on National, Latest,

Nepal Rastra Bank Act, 2058 has been amended/added as per the attached table in the integrated directive issued to the "A", "B" and "C" category banks and financial institutions licensed by the central bank.

 MAJOR HIGHLIGHTS: 

Amended Integrated Instructions issued to licenses A, B and C category Banks and Financial Institutions, 2079
Existing Rules Amended/Additional Rules
The interest rate (bank rate) of the loans provided by this bank to the licensed institutions in accordance with the existing law has been fixed at 7 percent. The interest rate (bank rate) of the loans provided by this bank to the licensed institutions in accordance with the existing law has been changed to 8.5 percent.
Fixed liquidity facility rate as upper limit of interest rate corridor at 7 percent, deposit collection rate as lower limit at 4 percent and repo rate as policy rate at 5.5 percent. Fixed liquidity facility rate as upper limit of interest rate corridor at 8 percent, deposit collection rate as lower limit at 5.5 percent and repo rate as policy rate at 7 percent.
Lending against shares shall attract risk weight of 150% Lending against shares (above Rs. 2.5 million) shall attract risk weight of 150%
Was not applicable Lending against bonds shall attract risk weight of 100 %.
Was not applicable Lending against shares (upto Rs. 2.5 million) shall attract risk weight of 100%
The maximum interest rate offered on institutional term deposits (including cash deposits) should be at least 1 percentage point lower than the maximum interest rate offered on term deposits for general public. If the maximum interest rate offered on institutional term deposits (including cash) is higher than the maximum interest rate offered on term deposits for general public, It should be reduced by at least 2 percentage points.
Commercial banks have to maintain Countercyclical Buffer as stipulated in Capital Adequacy Framework 2015. It has been postponed until 2078/79.  Commercial Banks from 2080/81, the countercyclical buffer as stipulated in the capital Adequacy Framework 2015 should be maintained.
Among the removal of loans provided by licensed banks and financial institutions, in the case of loans granted to areas heavily and moderately affected by the Covid-19, the impact on the borrower's project or business and the financial condition of the borrower, in accordance with the borrower's written action plan, in the event that the loan may be repaid in future industrial business operations. And if the financial institution is satisfied, at the request of the related borrower, the loan can be rescheduled and/or restructured subject to the following conditions by collecting 10 percent of the interest to be paid by the borrower for one time. The said clause has been removed 
Banks and financial institutions who have not opened a specific purpose overdraft, mortgage loan, property loan, personal term loan, loan provided on the mortgage of shares, including loans for personal purposes of any title, can only transfer up to 50 lakhs (per customer). When disbursing such a loan with a house/land mortgage, the ratio between the loan and the Fair Market Value of the mortgage security (Loan to Value Ratio) should be maintained at a maximum of 40 percent within Kathmandu Valley and at a maximum of 50 percent in case of other places.  Banks and financial institutions who have not opened a fixed purpose overdraft, mortgage loan, property loan, personal term loan, loan provided on the security of shares, etc, up to Rs 50 lakh per customer can be disbursed for personal purpose loans. While providing such new loan with respect to real estate mortgage, loan addition or loan renewal, the ratio between the loan and the Fair Market Value of the mortgage security (Loan to Value Ratio) should be maintained at a maximum of 30 percent within Kathmandu Valley and at a maximum of 40 percent in case of other places. 
Single obligor limit of margin nature of share mortgage loan from a licensed institution is maximum Rs. 4 crores and from all licensed institutions a maximum of Rs. 12 crore has been fixed. Flow from any one or all licensed institutions to share securities = Maximum Single Obligor Limit of margin nature of loans (Single Obligor Limit) Total Rs. 12 crore has been fixed.
Banks and financial institutions providing such loans should only grant/renew loans after making sure that the said limit is not exceeded while granting or renewing loans.
Also, Banks and financial institutions should establish a 100% loan loss provision in case of granting or renewing loans beyond the specified limit.
Institutions of "A", "B" and "C" categories licensed by this bank shall keep 3 % of the total deposit liability in this bank as mandatory balance. A minimum of 70 % of the mandatory cash balance to be maintained in accordance with this provision must be kept in this bank on a daily basis. Institutions of "A", "B" and "C" categories licensed by this bank must keep 4% of the total deposit liability in this bank as a mandatory cash balance from 2079/05/12. A minimum of 70% of the mandatory cash balance to be maintained in accordance with this provision must be kept in this bank on a daily basis.
Licensed "A" category banks must maintain 10 percent of total domestic deposits, "B" category development banks must maintain 8 percent and "C" category financial companies must maintain 7 percent statutory liquidity ratio. From Poush 2079, Licensed "A" category banks must maintain 12 percent of total domestic deposits, "B" category development banks must maintain 10 percent and "C" category financial companies must maintain 10 percent statutory liquidity ratio.
Interest rate given on deposit can be changed only monthly. The information regarding the interest rate applicable to deposits for the next month should be published before the beginning of the Nepali month.   Interest rate given on deposit can be changed only monthly. The information regarding the interest rate applicable to deposits (local and foreign currency) for the coming month should be published before the beginning of the Nepali month. However, if there is a change in the bank rate and policy rate set by Nepal Rastra Bank, the interest rate can be changed immediately and published.

Additionally, through the monetary policy of the current financial year, Governor Maha Prasad Adhikari amended the existing 4/12 provision for margin loans. To implement the revised system, the Central Bank has issued a unified guideline on Wednesday.

Now you can take a loan of more than four crore rupees from any bank and financial institution by keeping shares as collateral. However, it has been stipulated that the total loan taken by the debtor from various banks by keeping the shares as mortgage should not exceed 12 crore in total.

Now borrowers do not have to go to three banks to get a loan of 12 million by putting shares as collateral. They will be able to take a loan of up to 12 crore rupees from a single bank. However, the share mortgage loan cannot be more than 12 crore rupees.

Along with the single customer loan limit, the Rastra Bank has also reduced the risk burden to 100 percent for margin loans of less than 25 lakh rupees through monetary policy. According to the previous arrangement, risk weightage ratio was 150 percent of the resulting loans.

Likewise, Nepal Rastra Bank has said that the counter cyclical buffer will be applied according to the capital education framework 2015. On Wednesday, Rastra Bank issued integrated instructions to banks and financial institutions of categories A, B and C and said that the Capital Adequacy Framework will be implemented in accordance with the provisions made in 2015.

Similarly, Private banks will get more benefits if they participate in the process of merger, merger and acquisition and make an integrated transaction by the end of Poush. NRB has amended the Integrated Directive 2078 and made such provision. According to central Bank, if they participate in the process of merger, merger and acquisition and do integrated business before the end of Poush, they will get 5 different facilities for one more year.

 

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