Central bank tightens regulations on major shareholders of microfinance institutions

January 8, 2025, 11:00:40 AM |

KATHMANDU: Nepal Rastra Bank (NRB) has imposed stricter regulations on major shareholders of microfinance financial institutions. The central bank amended and revised the Unified Directives 2079 to introduce these new measures.

According to NRB, shareholders holding 1% or more of the paid-up capital of a microfinance institution and their immediate family members are prohibited from being appointed or reappointed to any level of employment in the institution, except for the positions of director or chief executive officer (CEO).

Additionally, shareholders holding 5% or more of the institution’s paid-up capital and their immediate family members are ineligible for appointment or reappointment to the position of CEO.

Microfinance institutions are also restricted from directly or indirectly investing in shares, debentures, or mutual funds of organized institutions. However, the directive allows investments in entities such as the National Banking Institute, Nepal Clearing House, Credit Information Center, and Nepal Finsoft Company, established with the involvement of NRB to facilitate its operations and obligations.

Investments in these entities are not considered violations of the directive. Furthermore, any investments made in shares, debentures, or mutual funds of unorganized institutions must be deducted from the primary capital during the calculation of the capital fund.

NRB has also clarified that wholesale microfinance institutions and retail microfinance institutions can merge, acquire, or integrate their operations. If these institutions successfully operate as a unified entity, they can continue functioning as a retail microfinance institution.

However, in cases where a wholesale microfinance institution merges or acquires another institution, it can still collect loans disbursed prior to the merger or acquisition as per the original repayment schedule, without any hindrance from the directive.

Fiscal Nepal |

Wednesday January 8, 2025, 11:00:40 AM |