NRB permits microfinance institutions to reschedule and restructure loans for the next three years

KATHMANDU: In a significant move aimed at alleviating the financial burden on borrowers, Nepal Rastra Bank (NRB) has authorized microfinance institutions (MFIs) to reschedule and restructure loans for their clients over the next three years. The decision, outlined in the latest revision of the Unified Directives issued on Tuesday, is expected to provide much-needed relief to borrowers struggling to meet their financial obligations.

As per the NRB’s directive, MFIs are required to implement these facilities by mid-December 2024. However, the rescheduling and restructuring options will only be available to borrowers who have been unable to repay their loans due to various financial challenges. This measure is intended to help individuals and businesses facing genuine difficulties in servicing their debt.

“For those loans which are categorized as non-performing, the MFIs must maintain the loan loss amount within the prescribed limit while rescheduling or restructuring credit taken by their clients,” states the circular issued by NRB. This requirement ensures that MFIs remain financially sound while offering relief to struggling borrowers.

The directive also stipulates that the loan loss amount cannot be reconciled until the concerned debtors have paid their interest dues continuously for the next year. This condition is designed to encourage borrowers to maintain regular payments while benefiting from the restructuring or rescheduling of their loans.

The NRB’s decision is part of a broader effort to stabilize the financial sector and support economic recovery in Nepal. By allowing MFIs to offer more flexible repayment options, the central bank aims to prevent further financial distress among borrowers and reduce the likelihood of widespread loan defaults.

This move is expected to have a positive impact on the microfinance sector, which plays a crucial role in providing financial services to low-income households and small businesses across Nepal. With the ability to reschedule and restructure loans, MFIs can continue to support their clients while managing their own financial risks.

As the implementation deadline approaches, MFIs will need to carefully assess the financial circumstances of their borrowers and determine the best course of action for each case. The NRB’s guidelines provide a framework for ensuring that these decisions are made in a way that balances the needs of borrowers with the financial stability of the institutions.

In the coming months, it will be crucial for MFIs to communicate effectively with their clients and provide clear information about the rescheduling and restructuring options available to them. This will help borrowers understand their rights and responsibilities under the new directive and make informed decisions about their financial future.

The NRB’s initiative reflects a growing recognition of the importance of financial inclusion and the need to support vulnerable populations during times of economic uncertainty. By providing a safety net for borrowers facing financial difficulties, the central bank is helping to ensure that the benefits of economic recovery are felt across all segments of society.