NRB plans to tighten working capital loans to be issued for companies – myRepublica

KATHMANDU, December 28: The Nepal Rastra Bank (NRB) has sought to curb working capital lending citing mainly import lending amid deteriorating liquidity position in the banking system and rising imports. booming.

In this regard, the central bank has prepared a draft 2021 working capital loan guideline and submitted it for input from stakeholders on Sunday. The guideline should also track the use of working capital loans issued by banks.

A working capital loan is a loan taken out to finance the day-to-day running of a business. These loans are not issued to purchase long-term assets or investments. Under this category, Nepalese banks provide cash credit, short-term loans, import-export related loans and term loans.

In the proposed provision, banks can only issue this type of loan for a maximum period of one year if the loan amount is a maximum of Rs 10 million. Banks are only allowed to provide up to 20% of annual transaction amounts in working capital loans within the prescribed limit.

In the case of loans of more than Rs 10 million, banks must assess the need for permanent working capital and the need for fluctuating working capital of the companies concerned. It has been proposed that the duration of the loans on fluctuating working capital be one year or less, while for the permanent working capital requirement, the duration will be the term loan of a period of at least five years. .

Similarly, companies applying for loans worth more than Rs 10 million will be required to submit audit reports for at least the past three years along with projected financial details for the next five years. Banks will need to assess the details of corporate borrowers’ financial liabilities when renewing working capital loans.