Nepal Rastra Bank (NRB) has allowed microfinance financial institutions to provide assistance to the families of their clients affected by natural disasters and accidents by using funds from their designated welfare resources.
Issuing a circular on Friday, the central bank said such funds may be used only for supporting disaster- or accident-affected client families, clients’ education and capacity development, and school-level education, health, and nutrition programmes for clients’ children. Previously, these funds could also be used for activities serving the collective interests of client members and for the protection and rehabilitation of borrowers facing business difficulties.
The circular also introduces new liquidity requirements. Microfinance institutions that do not mobilise deposits from the general public must now maintain liquid assets equivalent to 2.5 percent of their total savings liabilities of the previous month. Up to 90 percent of savings and fixed deposits held in banks and financial institutions can be counted as liquid assets. Earlier, only deposits maintained in commercial banks were eligible for this purpose.
In addition, NRB has instructed microfinance institutions to clearly disclose interest receivable on performing loans in their accounting policies. The central bank has reinforced the use of accrual-based accounting, requiring institutions to recognise income and expenses when they are earned or incurred, rather than when cash is received or paid.
