NRB revises the working capital loan guidelines

KATHMANDU: Nepal Rastra Bank (NRB) has informed that the guidelines regarding working capital loans have been revised. The Central Bank has revised the rules for working capital loans so that businessmen that have borrowed more than the limit can repay the debt in five instalments by Ashad 2082.

As per the revised rule, the entrepreneurs who took the working capital loans worth more than the threshold of Rs 10 million have been allowed to settle their outstanding dues by mid-July 2024/25. The private entrepreneurs are provided with flexibility to pay the loan amount in five equal installments in the prescribed time period.

Likewise, the BFIs can issue loans for fluctuating working capital needs for up to one year while the credit under the permanent working capital need can be issued for 3 to 10 years.

NRB Spokesperson Dr Gunakar Bhatta said that the central bank revised the rule to address the grievances of the private sector.

The parameters have been changed in response to the businessmen demands that the Central Bank’s working capital loan program be delayed for two years, interest rate to be lowered, and the banking liquidity be enhanced.

Here are some of the amendments made by NRB in the context of working capital loans:

• Current capital loans issued prior to Kartik 1, 2079 shall be paid semi-annually until the end of Ashad 2082. Also, banks and financial institutions will not be allowed to charge prepayment charges if they want to repay such periodic loans ahead of time.
• Limitation of working capital loan up to Rs. 1 crore: In the case of borrowers using current capital loans of Rs.1 crore or less from the entire banking system, banks and financial institutions may determine the limit of current capital loans subject to their current capital loan policies.
• While determining the limit of periodic loans for working capital purposes, at least 3 years of estimated financial statements and at least 3 years of audited statements should be analyzed in accordance with your working capital loan policy.
• In the case of new firms/organizations/companies with a period of less than 3 years from the start of business, banks and financial institutions can determine their current capital loan policy limit based on estimated operating expenses, and estimated cash and fund flow.
• Monitoring and management of current capital loans: Banks and financial institutions must conduct a mandatory inspection of current assets and current liabilities at least once in 3 months and update the report in the loan file. Such an inspection should be done once a year.
• Arrangements should be made to deposit the entire Revenue or Sales Proceeds of the borrower’s business into the current account in the licensed institution. Also, the borrower can give a standing instruction to the bank to transfer the current account amount to the loan account according to his needs. Banks and financial institutions should arrange for automatic deposit of funds from the current account to the loan account according to the standing instruction received from the borrower.