Rastra Bank mandates a minimum of 50% Debt service to Gross income ratio for personal loans of term nature; Applicable to class A, B and C banks

Nepal Rastra Bank (NRB) has published a circular for the commercial banks, development banks, and finance companies regarding amendment in the Unified Directives.

According to the circular, a new point has been added regarding the Debt service to gross income ratio. This new rule applies to personal loans such as Periodic loan, Home Loan and Hire purchase loan. In these loans, the BFIs need to maintained Debt service to gross income ratio of at least 50%. In addition to that:

The income source of the borrower must be proved and a document of proof must be attached.

The borrower's gross income must be determined after verifying the income source and tax clearance certificate.

If the ratio is above 50%, then the loan must be classified as "Watchlist Loan".