NRB limits regional FIs work area

KATHMANDU, SEP 28: 

The central bank has directed regional level financial institutions to limit their financing activities within the licensed regions. 

Issuing a circular, Nepal Rastra Bank (NRB) has asked class ‘B’, ‘C’ and ‘D’ financial institutions not to finance projects outside their approved area of operation. “Those financial institutions that have provided loans to projects outside their working area should recover such loans by mid-July 2014, or provision 100 per cent for loan loss,” said the directive.

Along with classifying financial institutions into ‘A’, ‘B’, ‘C’ and ‘D’ classes, NRB has further sub-categorised them based on their area of operation. Development banks, finance companies and microfinance institutions can operate at the national level, regional level, four to 10 districts, one to three districts, or can only conduct banking facilities in a single district, based on their capital structure.

However, hire purchase loans provided by regional financial institutions are not bound by the regulation, according to the directive. Earlier, NRB allowed regional financial institutions to finance projects outside their licensed territories provided collateral was within the approved physical territory. 

It has also removed necessity for banks to obtain a written approval from NRB for including any subordinated debt instruments like debentures and bonds in their supplementary capital.

Source: THT