March 2, 2021 | Investopaper
NRB has tightened its grip on the establishment of branches of microfinance institutions (MFIs). According to the new provision, the MFI should have two branches in rural local level before opening a branch in Kathmandu Valley. Earlier, only the approval of the NRB was enough.
As per the existing provision, approval of NRB is not required to open a branch office in a local level ward where there are no branches of BFIs. However, prior approval of NRB is required to open branches in local level wards of Kathmandu Valley, Metropolitan City and Sub-Metropolitan City where there are no branches of BFIs.
“After the opening of two branches outside the Kathmandu Valley (except in the metropolitan and sub-metropolitan areas) after Poush 2077 BS, approval will be given to open a branch in the local level wards where there are no branches of MFIs in the Kathmandu Valley,” said a recent NRB directive. At least one branch should be opened in the village municipality.
According to the current provision, the MFI should fulfill the prescribed criteria. Accordingly, the proposed location should be commercially viable, meet the specified minimum paid-up capital, meet the specified capital fund, non-performing loan not more than 5 percent and follow the conditions and instructions given by NRB. The central bank has also directed that the branch office should be opened and operated within six months from the date of approval.
The number of MFIs has been declining recently due to mergers and acquisitions. Accordingly, there are 78 MFIs till Ashwin end 2077 BS.