The National Reserve Board is considering tightening the requirements for working capital loans given to businesses.

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With the deepening liquidity crunch and soaring imports, Nepal Rastra Bank (NRB) has attempted to limit working capital loans, citing primarily import as the primary reason.

Working Capital Related Guideline 2021, which was created by the central bank in this respect and released for public comment on Sunday, has been circulated for from stakeholders. Furthermore, the guideline is required to track the proper use of the working capital loans that the are providing to their customers.

It is a loan taken out to finance the day-to-day operations of a firm that is called a working capital loan. Long-term assets or investments are not purchased with these loans. Nepali provide cash credit, short-term loans, loans for import-export purposes, and term loans in this category.

As planned, can only grant this sort of loan for a period of up to one year if the loan amount does not Rs 10 million in value. Within this defined limit, banks are only permitted to make working capital loans totaling up to 20% of yearly transaction amounts in working capital.

With respect to loan amounts greater than a total of Rs 10 million, must consider both the permanent and working capital requirements of the companies in question. While it has been proposed that loans for fluctuating working capital have a tenure of one year or less, it has been advocated that loans for permanent working capital have a tenure of at least five years.

Businesses requesting loans in excess of Rs 10 million would be required to provide audit reports from the previous three years, as well as predicted financial information for the next five years, in order to be considered. In order to renew the working capital loans, will need to analyze the specifics of the borrowing company’s financial liabilities.

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