In the course of debt recovery, microfinance employees are not allowed to use harsh methods such as fear, threats, and insults to the borrowers.

Nepal Rastra Bank has instructed the microfinance financial institutions in the operational guidelines issued on Tuesday not to adopt any kind of harsh method for loan recovery and to follow the prescribed standards/conducts.

These are the behaviors to be followed while recovering the debt

–     No harsh method should be adopted for debt recovery and the following behaviors should be followed while debt recovery.

–     Don't use threatening or insulting language to the debtor.

–     Don't call the debtor unnecessarily.

–      Debtor's family, friends and colleagues should not be insulted.

–      Don't threaten the debtor or the family with the threat of violence in order to harm the property or reputation.

–     The borrower should not be given false information about the consequences of not paying the loan.

–      In the places specified in the mutual agreement of the borrower and the institution, such as: group meeting, debt collection only in the office and if absent from the relevant place more than three times in a row, the practice of going to the borrower's home or workplace should be followed.

–     Guidelines on Loans Microfinance financial institutions shall carry out loan-related activities in accordance with the following guidelines.

–      To effectively implement the formulated loan policy including loan analysis, loan utilization monitoring and loan recovery.

–     Expected income from business or project, business plan, borrower's credit information, realistic family income and other topics should be developed and implemented effectively.

–     Prepare a loan payment schedule based on the borrower's income and business cash flow and provide it to the relevant customer. 

- Systematize and make more effective the system of taking/giving loan information while extending or renewing loans.

–     Promoting the practice of mandatorily doing project insurance in the case of loans issued so that the project itself remains as a mortgage for the operation of small enterprises.

–     In this way, the project itself will be the collateral, so as to motivate the borrowers to mobilize the disbursed loans in commercial production-based enterprises/projects based on local needs and potential.

–     Monitoring and orientation on a regular basis regarding the purpose for which the loan facility was taken from the organization, whether it was used/not used for the same purpose and whether the group member himself/herself received the loan amount.