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The Nepal Rastra Bank Prohibits Financial Institutions From Auctioning Collateral From Customers Who Have Been Delinquent On Their Debts For Up To Six Months

The Nepal Rastra Bank Prohibits Financial Institutions From Auctioning Collateral From Customers Who Have Been Delinquent On Their Debts For Up To Six Months

The Nepal Rastra Bank (NRB) has instructed banks and financial institutions (BFIs) to place collateral assets of defaulting borrowers up for auction only if the loan amount has been past due for six months or more.

The Central Bank came up with an emergency provision on Monday after revising its unified guidelines in order to provide relief for borrowers who have been negatively affected by the COVID-19 pandemic, according to a statement. Since the beginning of this year, many BFIs have begun auctioning off the debtors’ assets even when the payment is delayed by only a single month.

Similarly, the Nepal Rastra Bank (NRB) interfered in the country’s financial market a few months ago after it was discovered that a number of banks were threatening borrowers with publication of their profiles in daily newspapers or blacklisting them as loan defaulters. The Reserve Bank of India has allowed banks to conduct auctions only where the debts fall into the ‘doubtful’ category, as stipulated under the new rule.

In a similar vein, the central bank has altered its list of enterprises that have been particularly hard hit by the pandemic. On the newly-included list of educational institutions is the following: private and residential schools, secondary schools and higher education institutions such as colleges and universities, vocational training institutes, preschools and child care.

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Similarly, land transportation, beauty parlours, cosmetic surgery and related enterprises, consultancies, health centres, and fitness centres have all been identified as being among the industries that have been adversely affected. Previously, the National Recovery Board (NRB) classified these enterprises as being in the medium-level affected group.


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