KATHMANDU: Nepal Rastra Bank (NRB) has revised its Unified Directive 2024, targeting class ‘A’, ‘B’, and ‘C’ banks and financial institutions (BFIs), in line with the implementation of the monetary policy for the current fiscal year.
The updated directive includes key provisions concerning loan restructuring, margin lending, real estate credit, and home loans, while also introducing changes in areas such as financial reporting, capital adequacy, foreign employment loans, and interest rate policies.
In a move aligned with the monetary policy, the directive allows BFIs to restructure or reschedule loans, including housing and personal loans with specified purposes, for borrowers residing in areas affected by the earthquake in Jajarkot and Rukum.
BFIs can proceed with loan restructuring based on the borrower’s cash flow and income analysis, provided that at least 10 percent of the interest due is collected.
Restructuring must be completed by the end of Ashoj 2082, and such loans must be retained in their existing loan classification category.
The directive sets a maximum margin lending limit of Rs. 250 million per individual borrower across one or all licensed institutions. However, this limit does not apply to institutional investors established primarily for investing in the capital market.
BFIs must ensure that the limit is not breached when issuing or renewing loans, failing which they must provision 100 percent loan loss coverage.
The revised directive introduces differentiated loan-to-value (LTV) ratios for real estate and housing loans. For real estate loans, the fair market value to loan ratio must not exceed 50 percent.
In the case of residential housing projects approved by the government or legally registered construction companies, the LTV ratio can be as high as 70 percent. For first-time homebuyers, a loan of up to Rs. 30 million can be issued with an LTV ratio of up to 80 percent, provided certain conditions are met.
These include that the house or apartment must not exceed 3,000 square feet in size; the borrower must not have previously taken a housing loan from any institution; rental income cannot be shown as a source of repayment; and if interest rates rise, the monthly installment should not increase from what was originally agreed upon.
NRB has also made adjustments to financial reporting requirements, limits on resource mobilization, foreign employment loans, the base interest rate (bank rate), and supplementary capital requirements.
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