Nepal Rastra Bank issues new directives for bank and finance companies; relaxes regulations for firms to obtain loans

In the new directive issued by the Nepal Rastra Bank (NRB), banking and finance companies have been directed to issue loans upto Rs.50 Lakhs to firms without the requirement of tax clearance certificate.

The changes were proposed in the midterm review of the monetary policy which are now being implemented by the NRB. The NRB had made it compulsory for firms to present tax clearance certificate to take or renew loans. The new directive has relaxed the rule as firms were facing difficulty to obtain loans.

Loans more than Rs.50 Lakhs and less than Rs.2 Crore can be issued to firms from agricultural, tourism, small and medium scale industry on the basis of details submitted to the tax office.

However, for personal loans and loans worth more than Rs.2 Crore, the tax clearance certificate is compulsory, on the basis of which loans can be provided with maximum debt payment ratio of 60%. Moreover, the BFI’s have been directed to list firms on the watch list if it has been at a loss for 2 years and firms from the priority sector, if they have been at loss for 3 years, irrespective of the regularity of interest payments.

As proposed by the midterm review, loans against land has been increased to 60% of the valuation which was previously at 50%.