The central bank has barred same investors or a group of investors that hold up to 15 percent of equity investment in one institution from holding equity investment of more than one percent on other institutions. [break]
The investors having investments in financial institutions above the ceiling set by the central bank are required to bring down their investment to the limit within the next five years, according to the central bank´s directives issued on Tuesday.
Likewise, NRB has annulled the present arrangement under which there can be more than one director representing a single group or firm to the board of directors and directed that a single group of investors or firm will have only one representation to the board of a financial institution.
Similarly, the directive has also asked the owners having 25 percent equity investment in micro-finance institutions of Category ´D´ to bring down their investment to 25 percent limit by mid-July 2011.
NRB has amended Capital Adequacy Framework of the banks, requiring them to report their capital adequacy computations on monthly basis to the central bank against the earlier arrangements quarterly reporting. Now onwards, all the banks are now required to submit capital adequacy reporting within a within one month after the end of each month.
The central bank has also amended the classification of loans provided by the banks and has included outstanding interests along with principal while classifying loans that is based on loan default period.
The directives issued to all licensed financial institutions has made some changes and revoked earlier provision under which financial institutions were required to pay back both the principal and interests of term loans in a monthly installment. The changes mean the lending agencies are now free to set loan repayment mode of term loan with borrowers.
Similarly, financial institutions are also required to maintain a cent percent loan loss provision right from the day it assembles non-banking assets against the earlier directive under which they were required to maintain such provision after the end of a fiscal year. Likewise, they have also been allowed to settle such assets in their profit-loss accounts immediately after sales of such assets.
The directive has relaxed some conditions related to swapping of loans between the financial institutions. NRB has scrapped earlier conditions that the interest rates charged by the institutions that are purchasing loans should be less than the interest charged by the institution that is selling loans. Likewise, NRB has also allowed financial institutions to repurchase loans that have been swapped once.
The directive has also compelled the first-ending institutions to provide all details of the borrowers to institutions where the borrower is swapping loans. Earlier, there were complaints about the reluctance of institution in sharing borrowers´ information to another institution that purchases loans. The institution that is purchasing loans will have to maintain documents showing that the purchase of loans will be beneficial for the institution.
The new change also allows depositors to take loans from the same bank against deposit receipts that they maintain at the same bank. Earlier, such facility was available only for those who maintain fixed deposits. However, interest charged on such loans should not be less than the coupon rate on deposits.
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