Central Bank Imposes Risk Weight on Share Loan and Various Other Loans, Regulation Tightened for Promoters to Buy Promoter Shares of Other BFIs

Nepal Rastra Bank has increased the risk weight of various types of loans forwarded by banks and financial institutions, including on share loans.

Effective from Ashar, 2079, personal Overdraft Loans shall attract a risk weight of 150%. Meanwhile, Personal Hire purchase/ Personal Auto loans shall attract a risk weight of 150%. There was no such requirement before.

Furthermore, Real Estate loans for land acquisition and development and lending against shares shall also attract a risk weight of 150%. Previously, lending against securities (bonds and shares) attracted a risk weight of 100%.

Trust Receipt Loans for Trading Firms will now attract a risk weight of 120%.

The central bank has also tightened the requirement for promoters of banks and financial institutions to buy promoter shares of other BFIs. According to the added requirement, promoters who own 1% or more of promoter shareholding in a BFI must receive the central bank's approval to buy promoter shares of any other BFI.