The Nepal Rastra Bank has issued instructions to banks and financial institutions to implement this provision, which was made through the first quarterly review of monetary policy. Earlier, such a limit was only Rs 5 million.
What you should know
A new system has been implemented that allows the general public to borrow up to Rs 10 million in personal overdraft from banks and financial institutions. The Rastra Bank has issued instructions to banks and financial institutions to implement this system, which was introduced through the first quarterly review of monetary policy. Earlier, such a limit was only Rs 5 million.
The personal limit for borrowing through overdraft was previously Rs 10 million. However, the National Bank had reduced the limit to Rs 50 million. Now, the limit has been increased from Rs 50 million to Rs 10 million.
This arrangement seems to indicate that the National Bank wants more loans to be disbursed through overdraft. However, in the past, the National Bank had reduced the limit, saying that the purpose of the loans disbursed through personal overdrafts was not disclosed, which led to misuse.
A provision has also been implemented that allows the general public to disburse loans of up to Rs 1.5 million from microfinance financial institutions against collateral. This is the same situation as about four years ago. Since then, the National Bank had reduced the limit of Rs 1.5 million to Rs 7 million, citing problems in the microfinance sector. Now, the National Bank has again increased the limit on loans disbursed by microfinance financial institutions against collateral. The National Bank issued instructions on Tuesday for the implementation of the new arrangement. However, the limit on loans disbursed by microfinance financial institutions without collateral has been kept the same.
Now, borrowers of loans affected by the recent floods and landslides in Ilam and other districts will be eligible for restructuring and rescheduling. Under this arrangement, the Rastra Bank has made arrangements for enterprises and businesses in Ilam and other districts affected by the floods and landslides to restructure and reschedule their loans. However, for this, they will have to pay at least 10 percent of the outstanding interest. The Rastra Bank has provided this facility especially for borrowers affected by the floods and landslides in Ilam and other districts.
The Rastra Bank has reduced the standing liquidity facility rate (the interest rate paid by banks and financial institutions when they borrow from the Rastra Bank) as the upper limit of the interest rate corridor from 6 percent to 5.75 percent and the policy rate from 4.50 percent to 4.25 percent.
The Rastra Bank has stated that the standing liquidity facility rate (upper limit) and the policy rate have been reduced with the aim of gradually reducing the distance between the lower and upper limits of the interest rate corridor and keeping the policy rate in the middle of the corridor (symmetrical), according to the Rastra Bank. He said that such a system will reduce the interest rate that banks have to pay when borrowing from banks and financial institutions, which will reduce their costs.
However, the National Bank has maintained the fixed deposit facility rate, which is the lower limit of the interest rate corridor, at 2.75 percent. The National Bank has maintained the existing provisions regarding mandatory cash balance and statutory liquidity ratio.
Now, banks and financial institutions have been allowed to give institutional depositors an interest rate equal to or higher than that of ordinary depositors. This monetary policy arrangement will provide relief to institutional depositors. Because the National Bank has repealed the provision that banks and financial institutions must keep the interest rate of institutional term deposits at least 1 percentage point lower than the interest rate of individual term deposits.
Banks and financial institutions will be allowed to give the same or higher interest rate to founder depositors on deposits, just like ordinary savers. Previously, banks and financial institutions were required to keep the interest rate on institutional term deposits at least 1 percentage point lower than the interest rate on individual term deposits.
