NRB to Introduce Flexibility in Capital Loan Approach, Prompting Interest from Business Community

Nepal Rastra Bank (NRB) has expressed its willingness to adopt a more flexible approach to current capital loans, drawing significant interest from businessmen.

As stated in point number 93 of the monetary policy issued on Sunday, NRB will review the guidelines related to working capital loans based on the suggestions of banks and financial institutions.

Furthermore, the Central Bank has indicated its intention to incorporate the suggestions of industrialists and financial institutions into the existing capital guidelines and is in the process of implementing separate guidelines for the supervision of large loans.

However, some industrialists are raising concerns, suspecting that increased supervision by NRB on large industries may create an uncomfortable environment for loan recipients.

An official from the Federation of Nepalese Chambers of Commerce and Industry (FNCCI) was quoted as saying, "NRB's stance towards the private sector is not very positive. The purpose and impact of these guidelines will become clearer after their release. While regulation and supervision are necessary, it remains uncertain whether NRB's approach will practically benefit the sector or create discomfort."

NRB officials have emphasized that such guidance is crucial for the Central Bank to strengthen its supervision and ensure proper utilization of loans.

In the previous fiscal year's monetary policy, it was mentioned that a "large exposure framework" would be developed to identify loans with substantial credit consumption from banks and financial institutions. Information about the preparation of this framework has been provided in the current year's monetary policy, and NRB has indicated its implementation from this year.

Experts have been advising NRB to enhance the regulation and monitoring of large loans. Parshuram Kunwar Chhetri, a former banker, was quoted as stating, "Proper regulation and monitoring are necessary for loans to big borrowers, as they constitute a significant portion of the credit. Practical guidance for monitoring and regulation would be a welcome move."

Bishnu Neupane, Chairman of Saurabh Group and a construction material industrialist, was quoted as arguing that if NRB's guidelines are practical, there would be no issue with credit utilization. He stressed the importance of the Central Bank examining loan usage, production, and the amount borrowed to ensure proper regulation without causing discomfort to borrowers.

NRB's Executive Director, Dr. Gunakar Bhatt, was quoted as clarifying that these guidelines have been formulated to enhance the reasonableness of supervision and improve monitoring effectiveness. The framework is being developed in line with the monetary policy implemented by NRB in the previous fiscal year, with the aim to facilitate monitoring and regulation. 

Analyzing substantial debts is expected to aid in better debt management, as there has been confusion surrounding the permissible borrowing limits for debtors. The new guidelines will not only define "big loans" but will also address various regulatory aspects, such as how the loans are utilized and who holds the inter-commitment.

NRB's effort to strike a balance between supervision and ease of access to loans is seen as a significant step in supporting economic growth and responsible financial practices in the country.

(Disclaimer: This is a translation based on an original article. The consistency in information as been maintained for accuracy.)