Kathmandu, June 29

Nepal Rastra Bank (NRB) — the central regulatory and monetary authority — today clarified to the class ‘A’, ‘B’ and ‘C’ financial institutions that the deprived sector credit issued to the micro finance institutions by the banks and financial institutions (BFIs) need not be converted into consortium financing.

The half-yearly review of the Monetary Policy this year had instructed BFIs to convert loans of Rs one billion and above into consortium financing if the borrower had availed that quantum of credit from multiple financial institutions within this fiscal.

As per the provision of Monetary Policy, if banks and financial institutions fail to do so, such credit will be categorised under ‘watch list’ in the last quarter and the concerned BFI will have to allocate five per cent of the total loan amount for loan-loss provisioning.

However, BFIs do not have to follow consortium practice while lending to microfinance institutions under deprived sector category, reads the circular issued by NRB today.

The class ‘A’, ‘B’ and ‘C’ financial institutions have been instructed to lend five per cent, 4.5 per cent and four per cent of their total loan portfolio to the deprived sector.