NRB issues circular on loan restructuring and rescheduling to aid borrowers

May 18, Kathmandu: The Nepal Rastra Bank (NRB) has issued a circular to banks and financial institutions regarding loan restructuring and rescheduling. This initiative was introduced during the third monetary policy review for the current fiscal year 2079/80.

As part of the quarterly review, the central bank has implemented provisions allowing for the restructuring and rescheduling of loans in various sectors, such as hotels and restaurants, livestock, construction, and other sectors with loans up to Rs 50 million. These arrangements will come into effect from June 15.

According to the circular issued by the central bank on Wednesday, loan rescheduling and restructuring can be initiated upon repayment of at least 10 percent of the outstanding interest amount. This process requires a thorough analysis of the industry’s cash flow and income, as requested by the debtors.

The circular also outlines four conditions for implementing these arrangements. Firstly, only loans classified as active loans up to April 13 are eligible for restructuring and rescheduling. Secondly, a provision of a five percent credit loss must be made for the restructured and rescheduled loans. Furthermore, these loans can only be utilized within the same cluster in which they were initially classified.

It should be noted that the NRB has introduced these relaxed monetary measures through its quarterly review of the monetary policy, aiming to provide assistance and flexibility to borrowers facing financial challenges.