Nepalis can now get foreign loans of up to $200,000
KATHMANDU, Jan 31: Nepalis can now legally acquire zero-interest loans of up to US$ 200,000 (about Rs 17.29 million) from individuals, relatives, organizations and institutions based abroad.
Nepal Rastra Bank (NRB), the central monetary authority, on Wednesday introduced the provision in line with commitment made through the Monetary Policy introduced in mid-July 2012, ending the ban put on Nepali individuals from acquiring credit from foreign land.
“The provision was introduced to facilitate individuals who want to start or expand business with money borrowed from those based in foreign countries,” NRB Executive Director Lila Prakash Sitaula told Republica.
In order to acquire loans from abroad, individuals first have to obtain permission from the central bank.
“For this, borrowers will have to submit loan utilization plan and provide information on type of business they are currently doing or are planning to set up. They will also have to establish their loan repayment capability,” NRB said.
Along with these, borrowers will also have to show that no interest is levied on the credit that they are getting.
However, the central bank has acknowledged that it may not be easy for it to ascertain conditions on which individuals have obtained loans from abroad. “To prevent exploitation of this loophole, we have decided to allow borrowers to remit only the principal amount once the loan tenure expires,” a high-ranking NRB official said.
NRB has said repayment period of such loans should be at least five years and the credit should enter the country from formal channel.
BANKS ALLOWED TO OPEN CONTACT OFFICES ABROAD
Nepal Rastra Bank (NRB) on Wednesday allowed commercial banks to establish contact or representative office abroad.
To be able to expand their business abroad, category ´A´ financial institutions should meet minimum paid-up capital requirement set by the banking sector regulator.
They should also maintain capital buffer of extra one percentage point than the minimum requirement of 10 percent. Their non-performing loans should also not exceed five percent of the credit portfolio in the last three-year period, while banks and their board directors should not have faced any regulatory action in the last six-month period.
"If the applicant meets these conditions, it should file an application accompanied by approval extended by the board of directors to open a contact or representative office abroad," an NRB directive issued on Wednesday states.
"The applicant should also provide documents that prove the host country will not object to foreign banks´ expansion plans. It should also submit a report of feasibility study conducted in the host country and financial reports of the past three years."
If the central bank deems the applicant capable of expanding its business abroad, it will give the bank a period of six months to acquire permission from the host country to set up an office. "Based on this, the central bank will give final approval to the bank," the directive says.
"The bank should open a contact or representative office within six months of obtaining the final approval and inform the central bank about launch of its services abroad."