KATHMANDU, FEBRUARY 23
Nepal Rastra Bank (NRB) has unveiled amendments to the Unified Directive 2021-22 for class A, B and C financial institutions, tightening the provisions for personal overdraft loans, personal hire purchase loans, real estate loans and margin loans.
As per the amended directive, personal overdraft loans shall attract risk weight of 150 per cent.
Similarly, personal hire purchase/personal auto loans shall attract risk weight of 150 per cent.
The real estate loans for land acquisition and development shall attract risk weight of 150 per cent, as per the amendment.
There are no such provisions in the existing directive.
Likewise, lending against shares shall attract risk weight of 150 per cent. As per the current provision, loans against securities (bonds and shares) attract risk weight of 100 per cent.
Similarly, the central bank has raised the risk weight on trust receipt loans for trading firms to 120 per cent.
The aforementioned provisions, however, will only come into effect in mid-July, as per the central bank.
The remaining provisions that come into immediate effect include a new rule whereby a shareholder with one per cent or more institutional shares of any one bank or financial institution will be required to seek approval from the central bank before acquiring or selling institutional shares of any other bank or financial institution.
The central bank has provided some flexibility to the BFIs in meeting minimum regulatory requirement for sectoral credit.
The central bank has allowed the banks and financial institutions to meet the requirement of extending 15 per cent of their total credit to the agriculture sector, 10 per cent of total credit to energy sector and 15 per cent of their total credit to micro, cottage, small and medium enterprises only by mid-July 2025.
The earlier provisions required the targets to be met for the agriculture sector by mid-July 2023 and for the energy sector and micro, cottage, small and medium enterprises by mid-July 2024.
The bank rate, used for the purpose of lender of the last resort (LOLR) facility by the BFIs, has been set at seven per cent, up from five per cent provisioned earlier.
The central bank has also raised the standing liquidity facility (SLF) rate as the upper bound of the interest rate corridor (IRC) to seven per cent from five per cent.
Deposit collection rate as the lower bound of IRC has been revised from two per cent to four per cent and repo rate as the policy rate has been revised up from 3.5 per cent to 5.5 per cent.
A version of this article appears in the print on February 24, 2022, of The Himalayan Times.
