NRB enforces stringent policy for companies receiving loan from abroad

Published On: January 15, 2021 07:00 AM NPT By: Republica  | @RepublicaNepal

KATHMANDU, Jan 15: Nepal Rastra Bank (NRB) has put a curb on the firms receiving loan in foreign currency from lending institutions abroad.

Amending the Unified Circulars, the central bank has made it mandatory for domestic firms seeking a loan from foreign companies to produce necessary evidence to prove the rationale of the need for taking loan from abroad. “Such firms need to prove why they are not taking loans from domestic banks in a given amount and at a given interest rate when they forward the applications,” reads the new rule enforced by the NRB.

Last March, the NRB had loosened the knots for loan investment approval from relatives residing abroad, other personnel, non-resident Nepalis, parent organizations and other corporation bodies. At that time, the loan limit was also raised from US $500,000 to US $1 million. In case of the loan received from India, the threshold was revised to INR 100 million, up from INR 50 million.

The borrowing companies need to take approval of the Department of Industries and follow due procedures provisioned by Foreign Investment and Technology Transfer Act (FITTA), 2019. The act maintains that loans may be borrowed by issuing securities in the capital market of foreign countries by obtaining prior approval of NRB and Securities Board.

The applying companies should clearly mention the receiving date and payback date. In addition, such companies should submit documents to the NRB that ensure the companies are not blacklisted.

In addition, the central bank has capped the loan amount at a maximum of 60 percent of the capital investment of the domestic firms. The interest rate on the loan from foreign companies should not exceed 1year LIBOR plus three percent per annum. 


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