Credit of over Rs 500 million to be issued as consortium loan

Kathmandu, November 16

For now onwards, borrowers will have to seek consortium financing from the banks and financial institutions (BFIs) for loans amounting to Rs 500 million and above.

Issuing a circular today, Nepal Rastra Bank (NRB) — the central regulatory and monetary authority — has instructed the class ‘A’, ‘B’ and ‘C’ financial institutions to issue larger amount of credit only in consortium. This move of the central bank is aimed at controlling multiple banking practices and is expected to help maintain financial discipline.

After the instruction of the NRB, new loans amounting to Rs 500 million and above will be issued on consortium basis. As per the direction, borrowers who have already taken loan of the said amount will have to convert their loans to consortium financing within this fiscal.

“This move of the central bank will aid in controlling misuse of funds,” said Bhuvan Dahal, chief executive officer of Sanima Bank. “It will help maintain financial discipline because there will be less room even for influential businesspersons to get more than required credit sanctioned for a project.”

With this move, BFIs will be able to deflect huge financial shocks in case of some lending defaults and chances of more credit than required being sanctioned will be less, as per Dahal.

Likewise, NRB has also directed the BFIs to adopt necessary precautions regarding probable disasters and implement Contingency Management Framework to guarantee their services are not disrupted during

unfavourable situations like natural calamities.

The recovery plans will help BFIs to continue their services despite difficulties induced by nature and other possible accidents like fire, among others.