Nepal Rastra Bank (NRB) has introduced some policy relaxations for borrowers and bank and financial institutions (BFIs) hit by the earthquake.
Issuing a directive on Wednesday, the central regulatory bank has offered some relaxation to the BFIs in loan loss provisioning requirement, loan rescheduling, income recognition and accounting, grace period and capital adequacy calculation, among others.
The directive says BFIs can provision the loan loss by putting it under the ‘pass category’ in mid-July if a borrower repays the principal, interest or installment by mid-October due to the losses or damages in his/her project by the earthquake. This means that the BFIs will be required to provision less for the loan loss. BFIs will not be allowed to charge any penal interest or fees for the loans classified under this provisioning category.
Likewise, BFIs can reschedule the repayment period by extending repayment period by up to a year if a borrower makes written request to the respective BFI for loan rescheduling due to the erosion in his/her loan repayment capacity by the earthquake. The borrower should also present the proof that the earthquake has affected his/her income source or ability to repay the loans.
Similarly, NRB has allowed BFIs to extend grace period for quake-hit projects which is either completed or need some more time to complete.
NRB is issuing interest-free loans of Rs 5 million for BFIs to rebuild their headquarters damaged by the earthquake. The central bank has also announced that it would extend waiver of fine for BFIS, who fail to meet the cash reserve ratio, until the end of the next fiscal year. The central bank has also said that it would provide discount on fines imposed on BFIs for their failure to meet the requirement of mandatory deprived sector lending.
According to an NRB official, NRB introduced the special facilities after making assessment of the experiences in the financial sectors hit by natural disasters in countries like the Philippines, India (Gujarat) and Japan, among other countries.