KATHMANDU, July 16: Nepal Rastra Bank (NRB) has postponed the implementation of the variance analysis provision under the Working Capital Loan Guidelines, 2022 by another year, providing relief to businesses and financial institutions facing compliance challenges.
Issuing a circular on Wednesday, the central bank announced that the provision will now take effect from the beginning of fiscal year 2027/28. The deadline had previously been set for Friday, the first day of FY 2026/27. The extension follows repeated concerns from banks, financial institutions, and the private sector over practical difficulties in enforcing the rule.
Under the variance analysis requirement, banks must conduct detailed reviews to verify whether projected financial statements submitted by borrowers align with actual performance. Loan limits are then determined based on the statement deemed closest to reality. Borrowers are required to submit projected financial statements annually, and once a loan is approved, the limit cannot be revised until audited financial statements are available.
Revised interest rate corridor system introduced
As per the guidelines, banks and financial institutions must disburse, renew, and review working capital loans strictly within the prescribed framework. Entrepreneurs are allowed to borrow up to 25 percent of their annual turnover as working capital. Initially, borrowers exceeding this threshold were required to adjust their exposure by mid-July 2025. With two deadline extensions, the adjustment must now be completed by mid-July 2027.
Without the extension, banks would have been compelled to classify excess working capital loans as 100 percent loss from Friday, a move that could have sharply increased non-performing loans (NPLs) and eroded capital reserves.
The working capital guidelines were introduced in October 2022 under pressure from the International Monetary Fund (IMF). However, business communities have consistently demanded flexibility, arguing that strict enforcement would disrupt operations and credit flows.
