Nepal Rastra Bank Eases Deposit Rules Amid Rising Non-Performing Loans

Kathmandu – In light of the increasing levels of non-performing loans (NPL) in banks and financial institutions, Nepal Rastra Bank (NRB) has decided to relax its deposit conditions for its employees’ fixed deposits. Under the new provisions, banks and financial institutions with bad loans between 5% and 8% will now be eligible to attract deposits from NRB employees, a facility that was previously available only to institutions with NPL of up to 5%.

The rise in NPL across the banking sector has raised concerns about the overall stability of the financial system. To alleviate the challenges faced by financial institutions in managing liquidity, NRB has decided to expand the criteria for institutions eligible for employee deposits. This change was announced through an investment notification issued by NRB on Sunday, which outlined the terms for a fixed deposit scheme worth approximately Rs 4 billion.

Under the new arrangement, commercial banks can accept up to Rs 3.20 billion in deposits, development banks are allowed to take up to Rs 600 million, and finance companies can receive deposits up to Rs 200 million. However, to qualify for this scheme, financial institutions must meet certain conditions. They must ensure that their total NPL do not exceed 8%, with net NPL ratios remaining below 3%. Additionally, the institutions must have been in operation for at least two years and must meet the minimum capital requirements set by NRB.