Working Capital Management Provisions in Nepal
Working Capital Management
|
Earlier |
Now |
|
To get working capital loan you have
to show 5 years Financial Statement to the BFIs |
3 Years Financial Statement |
|
Maximum Loan Period-5years only, half
yearly repayment installments |
3-10 Years and can be paid in 5
installments rather than half yearly. |
|
Last deadline for loan repayment was
set to repay by Mid-June 2023 |
Mid-June 2025 |
Industrialists/business persons who have borrowed working capital
loan more than the limit can repay in 5 installments by Mid July 2025, such
loans issued prior to Nov. 2022 can be paid Up to Mid-June 2025. Such loans in
excess of the limit restructured by repaying from Mid-July 2023 to Mid-July 2025.
If a borrower wants to repay the loan before the end of July
2025, BFIs cannot impose a prepayment-charges or any other fees.
The guidelines will be applicable to working capital loans
above Rs.10 million.
The central bank has said that permanent working capital
loans could be provided for a period of 3-10 years. Earlier, the NRB had a
provision of providing such loans for up to 5 years only.
The central bank has also reduced the requirement of 5 years
of financial statements to get the working capital loans to 3 years.
The Nepal Rastra Bank (NRB) has amended the working capital
loan guidelines,2022 implemented in October last year allowing the creditors,
who have obtained the loan above the limits set by the central bank, to clear
such loans in a period of two-and-a-half years.
Now the creditors can clear the loan by mid-July 2025, repaying
it in installment of various sizes. The installments to repay the limit-exceeding
working capital loans are 10 per cent by mid-July2023, 20 per cent by mid-Jan
2024, 20 per cent by mid-July 2024, 20 per cent by mid-Jan 2025 and 30 per cent
by mid-July 2025.
As per guidelines, a firm with a estimated annual transaction
up to Rs.20 million will get a loan of up to 20 per cent of its annual turnover.
However, it can obtain up to 40 per cent of annual turnover amount in special
cases.
The provisions have clauses whereby the businesses seeking
such loan should submit the audit reports of the past 5 years and it should be utilized
for commercial purposes.
The central bank has also informed that the duration,
repayment schedule and installment amount cannot be changed. Likewise,
according to amended provisions, if any entrepreneur wanted to repay the term
loan for the working capital purposes, the banks and financial institutions
(BFIs) cannot levy any prepayment charges. However, this provision does not
apply in case of credit purchase or takeover or transfer of such loans.
NRB addresses private sector’s demand.
Private sector entrepreneurs, including their organizations
like the federation of Nepalese Chamber of Commerce and Industry (FNCCI), Confederation
of Nepalese Industry (CNI), Nepal Chamber of Commerce (NCC), Commodity Business
Association (CBA) and regional chamber (RC) had been demanding the repeal or
postponement of the guidelines since its implementation more than two-and-a-half
months ago. However, the central bank had been refusing to listen to their
demands maintain that the new guidelines were introduced to check the misuse of
loans in unproductive sectors. Governor of NRB, Maha Prasad Adhikari had said in
Sep 2022 after the amendment of guidelines a month earlier that there had been
over financing in the working capital loans by the banking sectors, i.e.
banking capital and the central bank wanted to make sure that the loan was utilized
for commercial purposes.
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