During loan recovery, microfinance employees are not allowed to use harsh methods such as fear, threats, 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.

According to the guidelines of the National Bank, microfinance employees are no longer allowed to use threatening or insulting language to borrowers. The National Bank has arranged that the borrower should not call the borrower unnecessarily, should not insult the borrower's family, friends and colleagues, should not threaten the borrower or the family's property or reputation with violence, and should not give false information about the consequences of not paying the loan.

Similarly, the National Bank has instructed to adopt the practice of going to the borrower's home or workplace only if he is absent from the relevant place more than three times in a row, such as at the location specified in the mutual agreement between the borrower and the institution: group meeting, office. In the

guidance, certain arrangements have also been made regarding loan utilization. According to which, the credit policy designed with the topics of loan analysis, loan utilization monitoring and loan recovery must be effectively implemented. 

'The loan analysis method should be developed and implemented effectively, including the expected income from the business or project, business plan, borrower's credit information, realistic family income,' the guidance says, 'a loan payment schedule should be prepared based on the borrower's income and business cash flow. It should be made available to the concerned customers.'' "For the operation of small enterprises, the practice of mandatory project insurance should be promoted in the case of loans provided with the project as collateral," the National Bank said, "Thus, the loans provided with the project as collateral should be transferred to enterprises/projects based on commercial production based on local needs and potential. Debtors should be motivated to mobilize.' 

There is also an instruction to regularly monitor whether the loan facility is not used for the purpose for which the loan facility was taken from the microfinance financial institution and whether the group members themselves have received the loan amount. The National Bank has also asked to orient the employees to follow the guidelines. 

The National Bank has instructed to appoint a loan officer/employee with clear responsibilities for monitoring the utilization of the loan and be in constant contact with the borrower to motivate the borrower to use the loan for the right purpose. 'The borrower must monitor the source of cash used for loan installments and interest payments,' the guidance states, 'Monitoring of loan utilization should be done at least semi-annually and a periodic report should be prepared and implemented.' It is mentioned in the guidance that a registration mechanism should be prepared, an officer should be appointed to hear the complaints and also arrangements should be made to collect complaints on a branch-wise basis. National level organizations should appoint 2 levels (provincial level and central level) grievance officers. Even field assistants should collect complaints and send them to higher levels for management and the process of receiving complaints should be simple and free,'' the guidance states.