As the lack of liquidity in the market has become extreme, Nepal Rastra Bank (NRB) has decided to tighten the working capital of banks and financial institutions. Nepal Rastra Bank (NRB) is about to issue guideline 2078 on working capital loans after the increase in imports due to the increase in current capital loans and pressure on the balance of payments.
NRB has prepared a draft guideline for managing current capital loans and sought suggestions from stakeholders. The guideline stipulates that the limitation and monitoring of current capital credit will ensure uniformity in the current capital credit of banks and financial institutions, make the loan approval process and loan utilization transparent and facilitate the development of a basic system to ensure loan utilization.
In the draft, when banks and financial institutions give working capital loans to any company, only 20 percent of the annual turnover can be given based on the capacity of the company by testing and evaluating the current assets of the company.
Similarly, while determining the limit of current capital loan above Rs. 10 million, provision has been made to determine the limit of the amount which can be up to 20 percent of the annual estimated turnover of volatile working capital by identifying the permanent or temporary working capital requirement. The term of this loan is also proposed to be less than one year and renewable.
Similarly, a fixed-term working loan of at least 5 years should be provided to the working capital. But for this, it is necessary to analyze the estimated financial statements of five years and the audited details of at least 3 years and follow the policy related to the loan. However, companies older than three years will be able to set limits according to their current capital loan policy.
Banks and financial institutions will have to renew their working capital on the basis of utilization and need analysis. Similarly, the current capital loan provision of banks and financial institutions should clearly disclose the amount and margin of movable assets required for loan security.
Real-estate security is not required for working capital. Similarly, it has been proposed in the draft that banks and financial institutions should monitor and manage the current capital loan every three months.
