Nepal Rastra Bank Eases Working Capital Loan Guidelines for Businesses

Kathmandu. Nepal Rastra Bank (NRB) has relaxed its policy regarding working capital loans. Addressing the demands of business communities, the central bank has amended the Working Capital Loan Guideline, 2079.

According to the revised guideline, banks and financial institutions will now be able to determine the repayment period for permanent working capital loans themselves. Previously, such loans were mandated to have a term of 3 to 10 years.

With this change, banks can now set the minimum and maximum limits for such loans after analyzing the nature of the business, sector, and cash flow.

The central bank has also eased the outstanding limit for cash credit loans. The previous requirement was to maintain an outstanding balance of less than 10 percent of the loan limit; this has been reduced, allowing for an outstanding balance of less than 30 percent.

Furthermore, existing permanent working capital loans can be rescheduled once by Ashad end, 2083, based on the borrower's cash flow and needs. The amendment also stipulates that rescheduling under these circumstances will not require downgrading the loan to a non-performing category or making additional loan loss provisions.

On another note, NRB has also facilitated the rescheduling of loans for businesses displaced due to the expansion of highways like Hetauda East-West Highway and the Mid-Hill Highway. For such loans, upon the borrower's request, banks can reschedule or restructure the loan if at least 10 percent of the interest due is paid after analyzing the cash flow.

However, this facility must be availed by Ashad end, 2083. When restructuring the loans of highway-displaced businesses, banks are also exempted from downgrading the loan to a lower category or making additional provisioning.