CIM suggest easing terms for restructured loans

Kathmandu, June 25

Raising concerns over the rigid framework around loan restructuring and reclassification, the Chamber of Industries Morang (CIM) recommended the Nepal Rastra Bank (NRB) to ease current provision so that restructured loans can be classified under 'watchlist' status rather than being mandatorily labelled as non-performing assets (NPA).

It demanded that the provisioning requirements should be brough down to 5 per cent if 15 per cent interest is paid.

As Nepal Rastra Bank (NRB) prepares to unveil its monetary policy for the upcoming fiscal year 2025/26, the CIM has submitted an 18-point recommendation urging the central bank to adopt bold, flexible, and forward-looking reforms to address mounting economic challenges facing the industrial and business community.

Presenting the suggestions on behalf of the Chamber, President Nand Kishor Rathi stressed that the country’s private sector, particularly small, medium, and large-scale industries, is struggling with liquidity shortages, market contraction, debt repayment pressures, and regulatory inflexibility.

He said that these constraints have significantly impacted production, investment, and employment in the industrial heartland of eastern Nepal.

The CIM also called for increasing the working capital loan limit from the current 50 per cent to at least 70–80 per cent of the total working capital requirement, citing extended credit cycles now lasting beyond 180 days due to sluggish sales and collections.

It also demanded the establishment of mechanisms to regulate and safeguard credit-based transactions in the private sector. With no official oversight, businesses are at high risk of loss when credit remains unpaid.

The Chamber suggested that the NRB allow financial institutions to report defaulters to credit bureaus and recommends mandatory annual audit submissions to the local revenue offices.

The organisation has further called for extending the payment period of import-related usance letters of credit (LCs) from 90 to 180 days, in line with current international trading conditions, and for increasing the loan-to-collateral ratio from 50 per cent to 80 per cent to facilitate access to financing.

The CIM has strongly pushed for the implementation of the long-awaited Asset Management Company as previously proposed in monetary policy but never actualised due to lack of enabling legislation. It argued that such a mechanism is now urgent to revive stalled industrial projects and mitigate systemic banking risk.

It has also proposed institutionalising Business Development Services (BDS) in each province, offering start-ups and SMEs streamlined support in licensing, legal, technical, and financial advisory services.

The business community of Morang urged NRB to clarify policies regarding the use of these services and promote investment in private equity and venture capital (PEVC), which remains constrained by current monetary restrictions.

In a bid to reduce credit risk and promote domestic production, the CIM has sought relaxed risk weightage and provisioning norms for loans issued to production-based and agri-processing industries that use local raw materials. "Such support could reduce the country’s trade deficit and support returnee migrant workers in establishing enterprises at home," read the suggestions.

Stating that with interest rates, liquidity levels, and credit policy frequently changing, the private sector finds it difficult to make medium-term financial forecasts, the CIM called for more predictable financial regulation, with sufficient transition periods and stable interest rates, especially for productive sector loans, for at least five years.

Likewise, it recommended harmonising loan documentation practices across financial institutions. Despite having similar loan types, banks currently require different paperwork, creating legal and administrative hurdles for businesses.

Published in The Rising Nepal daily on 26 June 2025.