Nepal Rastra Bank (NRB) on Sunday directed banks and financial institutions (BFIs) to furnish details of lending above Rs 1 million to Credit Information Bureau (CIB) within 15 days of lending to keep track of larger segment of lending.
At present, the BFIs are required to provide such information only in the events of loans exceeding Rs 2.5 million.
NRB spokesperson Bhasker Mani Gnawali said that the amendment in the directive was the regulator’s attempt to make the information on the lending more transparent and include larger portion of lending and a greater number of borrowers in the credit information system. “Of late, the BFIs have been lending heavily in small- and medium-sized enterprises in the area of agriculture or retail outlets,” said Gnawali. “Size of loan in such category is less than Rs 2.5 in most of the cases, which means that a large percent of lending is out of the information system.”
He added that unless the significant chunk of lending from the formal financial system was within the credit information system, the information provided by such system could be misleading. “Therefore, it was very important to make such changes,” said Gnawali. The directive also asks the BFIs to provide information to CIB if sum of the loans to a client from different branches of a bank or financial institution exceeds Rs 1 million.
Similarly, the NRB has brought down the limit for defaulted loan from previous Rs 2.5 million to Rs 1 million. “So, if the borrower doesn’t pay interest and principal of the loan exceeding Rs 1 million for one year, the lending BFI should recommend his/her name to CIB for black listing,” reads the amended directive. “The CIB has to black list such borrowers within 15 days upon receiving such recommendations from the lending BFI.” According to the directive, other conditions of black listing remain same although the loan size for entire condition remains more than Rs 1 million.
Welcoming the central bank’s move, bankers said that the inclusion of larger segment of lending from the formal sector to information system would help in bringing the financial stability in the country. “Introduction of this provision may add administrative hassle to the BFIs but it will be helpful in enriching the credit information system,” said B N Gharti, deputy general manager of Kist Bank.
The CIB had also been requesting the NRB to make a provision which would give it more business opportunities.
Posted on: 2012-11-26 09:15