Friday, August 17, 2012

PAN must for loans above Rs 10m

Kathmandu, Aug, 17, 2012

Nepal Rastra Bank (NRB) has made it mandatory for borrowers borrowing more than Rs 10 million from financial institutions to have Permanent Account Number (PAN).

The central bank has made the provision mandatory in order to keep the large borrowers under the tax administration’s scanner. “Though there are some 700,000 people who have borrowed from banks for commercial purposes, only 500,000 are registered with PAN, according to Inland Revenue Department data,” said the department’s deputy director general Madhu Kumar Marasini.

The central bank has also brought a bunch of regulations in line with the year’s monetary policy. According to the circular, the new cash reserve ratio rule will be implemented from

August 19. This year’s monetary policy had hiked up cash reserve ratio to six per cent for commercial banks, 5.5 per cent for development banks and

five per cent for finance companies due to ample liquidity in the market.

Even microfinance institutions have to maintain a cash reserve of two per cent of their total deposits. Central bank has also fixed eight per cent bank rate that will be applicable for loans under lender to last resort facility and standing liquidity facility along with the discount rate of government securities, in the circular as announced in the monetary policy.

As for deprived sector lending, financial institutions can increase 0.25 percentage point by mid-January 2013 and another 0.25 per cent point by the end of the current fiscal year. The monetary policy has increased deprived sector lending by banks to four per cent of total lending, 3.5 per cent for development banks and three per cent for finance companies –– a 0.5 percentage point increment from last year.

Likewise, NRB has increased the limit on microfinance loans to Rs 300,000 against acceptable collateral, provided the borrower belongs to a microfinance group, while a microfinance borrower without a microfinance group can obtain loans of up to Rs 60,000 only.

NRB has extended the scope of agriculture loans to agro tools, fertilisers, seeds and saplings, storage and also processing of tea, coffee, ginger and fruits. Moreover, it has asked commercial banks to assess potential risks apart from identified ones based on Internal Capital Adequacy Assessment Process (ICAAP) Guidelines and prepare ICAAP Policy before mid-January 2013.

Source: THT

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