NRB's Digital Lending Guidelines Allow Loans of up to 5 Lakhs in Nepal

According to the central bank of Nepal’s new digital lending guidelines, banks in Nepal can now lend up to Rs. 5,00,000 to people who apply for loans online.

Nepal Rastra Bank, the central bank of Nepal, issued the new Digital Lending Guidelines 2078 on February 11, 2022.

As per the guidelines, people who have salary or business accounts in BFIs can apply for loans up to Rs. 5,00,000. For other account holders, the central bank has set a limit of Rs. 2,00,000 for digital lending.

The loan can be paid on an instalment basis over a period of up to three years. Banks and financial institutions (BFIs) can also partner with e-wallets, such as eSewa, Khalti, and IME Pay, to act as agents to facilitate loan applications and repayment.

Digital Transactions in Nepal

The number and volume of online transactions are seeing rapid growth in Nepal. The development and expansion of the digital transaction infrastructure such as real-time gross settlement (RTGS), interbank fund transfer, payment card, mobile wallet, and internet banking have all contributed significantly to the growth of online transactions.

Digital lending will assist in streamlining the loan application process by eliminating the need for customers to physically visit the bank. It will also help BFIs to save time and money.

However, this is not the first time that we have heard of digital loans in Nepal. In March of last year, F1 Soft, a Nepali fintech company, launched Foneloan, which provided instant loans digitally and without the need for collateral or paperwork.

However, the resettlement period for the loan through the service was only 30 days. Similarly, in December 2021, Kumari Bank had also introduced Buy Now, Pay Later (BNPL) service. It allowed the customers to get a loan from their mobile banking app on EMI for up to 12 months.

Both services had a maximum loan capacity of Rs. 2,00,000, required the respective bank’s mobile banking app, and relied on analytics software. They are different from personal loans.

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Digital Lending Guidelines

According to the guidelines, banks and financial institutions must maintain a separate portal for loan applications, from which customers can digitally submit required documents.

Additionally, BFIs can accept loan applications through their mobile banking applications. The loan applicants must then be notified digitally if their loans are approved.

The guidelines said that the banks and financial institutions should store the data of the customers and their financial information securely. The data should not be used or distributed for purposes other than loan processing.

If the customer fails to repay the loan, the BFIs should inform the Credit Information Bureau of Nepal to blacklist the customer, the central bank said. The central bank also requires BFIs to submit digital loan details to them every three months.

Payment Service Providers as an Agent

As mentioned previously, according to the guidelines, banks and financial institutions can make agreements with payment service providers to act as agents for digital lending.

The central bank said payment service providers should inform customers clearly about the banks or financial institutions from which they are about to borrow money.

Payment services providers should also develop a system to automate the processing of loan applications and the collection of principal and interest.

The central bank says BFIs can only charge customers for service fees and third-party charges, and the charges should be made clear to customers.

If payment service providers act as the bank or financial institution’s official agents, the guidelines state that the service providers should not collect service charges directly from customers; rather, the BFI should handle them.