Interest Capitalization Eased; Banks Ordered to Maintain 24-Hour Monitoring for Financial Crime Control
Kathmandu – Nepal Rastra Bank (NRB) has revised the Unified Directive, 2025 for Class A, B, and C banks and financial institutions, introducing new provisions effective June 24, 2026 under Section 79 of the Nepal Rastra Bank Act, 2002.
Under the revised rules, banks may capitalize accrued interest on long-term project loans during the grace period, provided the arrangement is included in the loan agreement. The provision applies to projects requiring at least two years before commercial operations or cash inflows begin. Institutions must formulate a separate policy for interest capitalization, covering project eligibility, cash-flow analysis, repayment terms, capital structure, and debt-to-equity ratios. Any such decision must be approved by the board of directors.
NRB has clarified that extending a grace period and capitalizing additional interest will classify the loan as restructured, requiring a minimum 25 percent loan-loss provision. However, hydropower projects unable to operate at full capacity due to delays in transmission line construction may partially capitalize interest without being treated as restructured loans. Similar relief has been provided for projects affected by natural disasters, civil unrest, or other circumstances beyond the borrower’s control, although such loans will be classified as restructured and require a 12.5 percent provision.
The central bank has also prohibited the capitalization of overdue interest on loans that have already been restructured or rescheduled. Capitalized interest must be recorded separately under “Interest Capitalized Term Loan.”
In addition, NRB has updated rules governing the freezing and unfreezing of bank accounts. Banks must now act on account-freezing and release instructions published through NRB’s website and will no longer receive separate letters or fax notifications. Institutions and responsible officials will be held accountable for failing to comply with online directives.
To strengthen the fight against financial crimes, banks and financial institutions have been instructed to maintain 24-hour support services for the temporary freezing of accounts upon requests from investigative or law-enforcement authorities. Dedicated contact numbers for such requests must be displayed on their websites, and any information sought by authorized agencies must be provided promptly.