Laxmi Capital News
NRB issues single borrower limit for ‘recovered’ FIs

Nepal Rastra Bank (NRB) — the central regulatoryand monetary authority — has instructed financial institutions (FIs) that weretermed ‘problematic’ earlier and have recently resumed operations after NRB’sresolution not to float loan in excess of 10 per cent of core capital of the FIwhile extending credit to a single borrower.

This provision will be applicable till the ‘recovered’ FIsdo not meet the paid-up capital requirement of the central bank. The‘recovered’ FIs are required to meet hiked paid-up capital requirement withintwo years of resuming operations after the central bank’s resolution.

Other banks and financial institutions can issue loans upto 25 per cent of their core capital while extending credit to a singleborrower. In the cases of loans to hydropower sector, central bank is flexibleto some extent in permissible single borrower limit.

After the central bank’s resolution, some ‘recovered’ FIshave resumed operations. These include General Finance (recently changed itsname to Best Finance), Arun Finance, Lalitpur Finance and Kuber MerchantFinance Ltd.

The FIs that have resumed operations after ‘recoveringtheir financial health’ have been given two years to meet the paid-up capitalrequirement of the central bank, as the Monetary Policy of the current fiscalhad announced to provide preferential treatment to them.

The finance companies have to meet the paid-up capitalworth Rs 800 million within the grace period extended by the NRB.

A bunch of finance companies are under the resolution processof the NRB and will come into operation after the resolution process concludes,according to officials at Problematic Bank Resolution Division under NRB.

Source: The Himalayan Times, 19thDecember 2017

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