Nepal Rastra Bank Revises Guidelines for Manufacturing Industry Capital Loans

Simplifying the manufacturing industry, Nepal Rastra Bank has revised the guidelines for current capital loans for the first time. Governor Maha Prasad Adhikari revised the guidelines after pressure from the government and industrialists.

The Nepal Rastra Bank has determined the limit according to the size of the loan in the case of manufacturing industries. Other industries will get working capital loans of up to Rs. 1 crore, while manufacturing industries will get up to Rs. 3 crore.

A limit of working capital loans to manufacturing industries has been fixed up to a total of Rs. 3 crores. Earlier, working capital loans up to a total of Rs. 1 crore could be availed from the overall banking system, but this has been removed. This guidance will not be applicable in the case of borrowers availing working capital loans up to Rs. 1 crore. NRB has now given this facility up to a total of Rs. 3 crore in the case of the manufacturing industry.

Similarly, the Nepal Rastra Bank has set a working capital loan limit of up to Rs. 2 crore (up to Rs. 4 crore in the case of manufacturing industries). Now, while determining the working capital loan limit of up to Rs. 4 crores for the manufacturing industry, it is stipulated that the total working capital loan limit should be maintained only up to the maximum amount of 20 percent of the estimated annual turnover/sales.

The term of such a loan should be 1 year or less, and such a loan limit is renewable. However, if the licensed organization analyzes various aspects of the enterprise business, if it is found to be justified, it is stipulated that the total working capital loan limit can be maintained up to the maximum amount of 50 percent of the estimated annual turnover/sales, mentioning the reason in the loan file. Earlier, it was only 40 percent.

The Nepal Rastra Bank has also defined the manufacturing industry in the amendment. "Manufacturing industry refers to an industry that produces goods by adding value by using raw materials or semi-finished goods with the use of certain human/machinery," the revision of the guidance states.

NRB has stipulated that among the various current capital loan accounts, the arrears of the cash credit loan account must be less than 10 percent of the loan limit for at least 7 consecutive days at any one time of the financial year.

The Federation of Nepalese Chamber of Commerce & Industries (FNCCI) and the Confederation of Nepalese Industries (CNI) are holding a meeting to decide the formal opinion on the revision of the guidelines. It is understood that the suggestion given by the private sector will be accepted positively as it has been revised.

The federation and the confederation, which pressed for revisions in the current capital loan guidance, are preparing to publish their formal views.

Federation President Chandra Prasad Dhakal was quoted as saying that he would respond only after studying the amendment. "It is positive to have revised guidelines. It remains to be seen what effect the revised points will have," 'We will make our opinion public by evening.'

Confederation President Rajesh Kumar Agarwal was quoted as saying that the revision of the guidelines will be discussed, and the official opinion will be made public.