Nepal Rastra Bank Revises Share Loan Limit to Rs. 15 Crores
October 6, 2023 | Investopaper
Investors can now avail share loans of up to 15 crore rupees, while institutional investors can access up to 20 crore rupees, following the revision of integrated directives by Nepal Rastra Bank. This change marks an increase from the previous 12 crore rupees limit for all share loans. Banks and financial institutions granting these loans are instructed to ensure compliance with these limits and maintain a 100% loan loss provision if exceeding the specified limit.
The Central Bank released a circular on Thursday to implement this new policy. This policy is introduced to alleviate the struggling real estate and stock market sectors. The central bank aims to support the economy by adopting a more lenient approach, as economic activities were hampered due to decreased demand.
Nepal Rastra Bank has also increased the limit for real estate mortgage loans. The credit limit for such loans has been raised to 50 percent by increasing the loan-to-value ratio. This marks an increase from the earlier 30 percent limit within Kathmandu Valley and 40 percent outside the valley. Furthermore, banks and financial institutions are now required to use a credit rating agency’s assessment as a basis for evaluating credit when extending or renewing loans of 500 million or more.
The policy revisions are intended to provide relief to both borrowers and banks. Changes include adjustments in loan loss provisions, extending loan restructuring deadlines, and expanding the areas where loans can be rescheduled. The central bank aims to ensure that the general public is not adversely affected by high interest rates, implementing restrictions on interest rate changes for certain types of loans.
Additionally, the central bank has extended the deadline for mandatory credit investment in priority sectors such as agriculture, energy, and small to medium-sized industries. It has also reduced the risk burden in auto loans, aiming to support the auto sector.
