Individuals Can Secure Loans up to Rs. 50 Lakhs Against Gold & Silver
October 8, 2024 | Investopaper
The Nepal Rastra Bank has implemented new regulations, issued on Tuesday, allowing individuals to secure loans of up to Rs. 50 lakhs against gold or silver held in banks and financial institutions. The directive specifies that for any loan secured by gold or silver, the collateral must be verified, ensuring that the precious metals are stored in a single bag to prevent fraud. If multiple bags are used without proper verification, the bank must account for a 100% loan loss.
In addition to changes regarding precious metal loans, the central bank has revised its policies on loan restructuring. It clarified that if a grace period is extended for loans related to hydroelectric projects that cannot operate at full capacity due to incomplete transmission lines, this will not automatically qualify as loan restructuring. However, if the grace period is officially extended, it will be treated as such, necessitating adjustments in loan loss provisions.
Furthermore, the Nepal Rastra Bank has tightened regulations for founding shareholders of banks. Those holding more than 0.5 percent of a bank’s paid-up capital are now prohibited from using their assets as collateral for loans from the same institution. This measure aims to enhance financial stability and prevent conflicts of interest within banking operations.
The bank has also set a limit on microfinance lending to impoverished groups, capping it at 40 percent of total wholesale loans. This regulation intends to ensure that microfinance institutions maintain adequate liquidity while serving low-income communities effectively.
