NRB revises limit on advance payment for imports

KATHMANDU, SEP 27 -

The Nepal Rastra Bank ( NRB ) has eased advance payment for the importers of goods and services, including lease from the third countries other than India.

The new provision will now allow importers to send more than the maximum amount fixed by the central bank against guarantee issued by foreign banks. Under the exisiting NRB provision, traders can make advance of $30,000 to import goods against draft and TT, while the maximum advance payment for service import is $10,000. “The provision was eased to ensure that a payment beyond limit could also be made through formal channel,” said a senior NRB official, claiming that the latest move would discourage hundi and other illegal mode of payment.

However, the new provision requires the importers to submit recommendation of their regulatory agency to make advance payment beyond the limit for service import.

Such bank guarantee will only be applicable for a specific period. “If transactions are not done within the timeframe, such bank guarantee should be seized and informed to the central bank’s foreign exchange management department,” states the circular.  

Meanwhile, local-level financial institutions (FIs) have been allowed to extend credit to projects only if they and the collateral are situated in their licensed operating area.

Issuing a circular on Wednesday, Nepal Rastra Bank ( NRB ) has ended the earlier arrangement under which they were allowed to lend to projects wherever they are if the collateral is in the working area.

Only national-level banks and financial institutions have been allowed to lend to projects wherever they are against collateral anywhere in the country. The central bank has, however, permitted local-level FIs to issue hire purchase loans anywhere in the country.

An NRB official said that the move had been taken to ensure their business activities carried out within certain area as they were licensed to increase financial access to that area.

The central bank said if any local financial institution has already lent beyond the working area, the loan should be regularized by mid-July 2014. “Otherwise, they will have to keep 100 percent loan loss provisioning for such loans,” stated the circular.  Meanwhile, the central bank has barred financial institutions that have already violated the provision of lending against collateral beyond the working area and have put provisioning from adjusting such provisioning as per the new regulation.

Source: The Kathmandu Post