Nepal Rastra Bank Extends Loan Repayment Period by Three Years for Microfinance Borrowers

Nepal Rastra Bank has announced an extension of the loan repayment period for microfinance borrowers by three years. The new circular, issued today, allows borrowers who have been unable to make repayments due to financial difficulties to extend their loan terms by an additional three years and apply for restructuring.

Previously, the loan restructuring period was limited to one year. Under the new guidelines, borrowers must complete the restructuring process by the end of Poush. Loans undergoing restructuring will require a provision for a 5 percent loan loss, though loans already classified as non-performing will retain their existing loan loss provisions.

The circular stipulates that the loan loss provision set during restructuring cannot be adjusted unless the loan has been regularly serviced for a continuous period of one year.

Additionally, borrowers listed on the blacklist for failing to repay loans or facilities must be recommended for removal from the blacklist by the respective institutions to the Credit Information Center, provided they have cleared all outstanding principal and interest payments.

Under the new directives, institutions must also recommend the removal of borrowers from the blacklist to the Credit Information Center if they have undergone restructuring or rescheduling as per the new guidelines.