Additional provisioning waived for certain loans

- POST REPORT, Kathmandu

Aug 25, 2014-

Nepal Rastra Bank (NRB) has freed banks and financial institutions (BFIs) from making an additional 20 percent provisioning for credit provided to three public enterprises and for personal loans of up to Rs 1.5 million as required previously.   The public enterprises which have been granted the privilege are Nepal Oil Corporation, Nepal Food Corporation and Agriculture Inputs Company which rely on government guarantees to get loans from lending agencies.

In the case of personal loans, the central bank has put certain conditions to qualify for the benefit: BFIs should have a clear credit policy on extending and recovering such credit and the board of the concerned BFIs should have prepared a separate product paper for such credit and implemented it, and the product paper should have been followed properly while providing such loans.

Likewise, the borrower’s source of income and capacity to repay loans must be clearly stated. The income source should be confirmed by a bank statement and the potential borrower should have obtained a permanent account number, stated a new directive of NRB.

Another pre-requisite for providing such loans is that the repayment table should be prepared in a way that requires the borrower to repay the loan in equal monthly instalments, and the maximum repayment period should not extend beyond five years. Similarly, BFIs cannot provide such loans in excess of 5 percent of their total credit.

NRB has already released BFIs from making an additional provision of 20 percent for credit card loans. BFIs have been asked to make 100 percent provisioning if the  repayment is delayed by more than 90 days in the case of both credit card and personal loans.

Published: 26-08-2014 09:42

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