KATHMANDU, Aug 14: Nepal Rastra Bank (NRB) has directed banks and financial institutions (BFIs) not to immediately deprive borrowers of interest subsidies if they fail to pay a quarterly installment on time due to temporary or circumstantial reasons.
Amending the Integrated Procedure on Interest Subsidy for Concessional Loans, 2018, the NRB introduced flexible measures for borrowers facing situational compulsion in settling regular installments. The directive states: “Borrowers who are unable to pay a quarterly installment on time due to temporary and circumstantial reasons should not be deprived immediately from receiving interest subsidy.”
The provision aims to provide relief to borrowers who miss payments in a given quarter due to circumstances beyond their control. If arrears are cleared in the following quarter, BFIs will still be able to claim interest subsidy for the entire period, provided they verify the circumstances and confirm proper utilization of the loan.
Revised interest rate corridor system introduced
The amendment has simplified access to subsidized loans, ensuring continuation of interest subsidies on concessional loans, private housing construction loans for disaster victims, and loans for borrowers struggling with installment payments due to unforeseen situations.
Under the interest subsidy scheme, the government bears 5 to 6 percentage points of the interest cost, depending on the loan category. Subsidy schemes cover loans up to Rs 50 million for commercial agro and livestock farming, Rs 700,000 for educated self-employed youth, Rs 1 million for business projects of migrant worker returnees, Rs 1.5 million for women entrepreneurs, and Rs 1 million for businesses operated by the Dalit community.
According to the amended provision, interest subsidy will remain available for five years from the date of renewal of concessional loans. The changes address practical problems previously encountered in loan renewal and subsidy continuation.
Additionally, BFIs are now required to obtain a self-declaration from borrowers seeking private housing construction loans if they are disaster victims who have not received housing grants from the National Disaster Risk Reduction and Management Authority.
This means that borrowers whose homes were damaged by disasters but who are not covered by government housing subsidies can proceed with loan applications after submitting a self-declaration. The measure is expected to improve access to subsidized loans for disaster-affected households.
The NRB has clarified that loans disbursed under earlier policy provisions will continue to receive subsidies in line with the conditions specified in the same procedure, including those related to loan security and insurance services.
