Directive 2

1.
Classification of Loan
> Pass
> Watch List

> Sub-Standard
> Doubtful
> Loss
1.1 Conditions for Watch-List
2. Additional provision for Pass Loan
3. Additional Provisions Relating to Loss Loans

4) In cases of the term loans extended in
installments
(Note: For the purpose of this clause "term loan"
means a credit/advances made available having
fixed the repayment period of more than one
year.)
5) Provisions Relating to Gold/Silver Loan
6) Principal and Interest not allowed to be

recovered crossing the overdraft limit:
(Provided that, this provision shall not be deemed

to prohibit to recover the principal and interest
having debited the balance in an account of the
customer)
7) Provisions Relating to Grace (Moratorium) Perio
(Grace period: Period between Date in which loan

is provided to date of start of payment of
installment)
8) Provisions Relating to Rescheduling and
Restructuring of Loans
("rescheduling": process of extending time

limit of repayment of the loan availed by customer
. "restructuring": the process of
changing the nature or terms and conditions of
altering the restrictions on or changing the time
limit of the credit facilities
9. Provision to be maintained for loan loss

(Note: such restructured and rescheduled loans can
be classified as pass loan)
(Note: such restructured and rescheduled loans can

be classified as pass loan)
Note: details of such loans should be classified
seperately
(No additional provision required

in case of loans before this provision, upto
asadh 2071 and in case of term loan, upto final
installment)
(Note: Loan loss provision made for performing loan

shall be treated as general loan loss provision and
that for non-performing loans shall be treated as
specific loan loss provision. )
10.Conditions for Adjustment in loan loss provisio
11.Loss Provisions and Auction of Non-banking ass

12. Provisions Relating to Credit
Sale/Purchase/Repurchase and Takeover
(CS/CP/RP/TO)
13. Prohibition on advancing loan and accepting

deposit based on financial guarantee
14. Provisions Relating to Deposit and Loan
Transaction
16. Loans to be advanced on security of shares in

the nature of margin lending
17) Provisions related to Promoter shares as
collateral
(provision for such loan shall be clearly stated)
(If the loan is unsecured due to fall in market value of

such shares, additional collateral shall be taken)
18) With regard to Bank Guarantee

19) Inter-Bank Transaction/Borrowing / Investment:
20) Advancing loans against immovable property

as collateral security within the approved
geographical area:
21) Trust Receipt Loan:

(Definition: Short term import loan provided by the
bank for settling goods where title is held by the bank
under letter of credit)
22. Loan not to be provided under security/collateral of cheques(not even local cheques as it can be cleared
23. Revolving nature personal loans :
24. Borrower to obtain PAN
25.In case of loans provided to risk

takers( director, Chief executive officer, or
management level officer)
26.Loan amount to be disbursed only through A/C
payee cheque:
27. loan to be provided after analysis of

Environmental effect
28. Related to Payment schedule
29. If guarantee given , liability only upto the

amount mentioned in guarantee paper
30. "Procedure regarding interest grant for

Commercial agriculture and animal husbandary
loan 2073"
31. Related to collateral release
32. Provision related to working capital nature

loan
33. Licensed institutions availing Multiple banking loan
of Rs. 1 Arba or more shall be converted into
Consortium loan. Loans not converted into
Consortium loan as per this provision shall be kept
under watchlist. However this provision is not
compulsory in case of micro finance loan provided
under deprived sector loan
34. For promotion of profitable activities in
Commercial agriculture and animal husbandary ,
micro finance and earthquake affected area, loan upto
10 lac can be provided taking borrowers repayment
capacity by accepting cultivable land with no road
access as collateral
35. Loan upto 10 lacs can be provided for coffee,

orange, tea and other agricultural business and
animal husbandary and other milk product business
using the probable project as collateral
36. BAFI to follow Financial Rehabilitation fund

Procedural Manual ,2072
37. details regarding loan provision within 15 days after end of each quarter using form no. 2.1, 2.2 and 2.3 to Super
38. Punishment as per section 100 of NRB act for non compliance of directive
39. Previous Unified directive has been repealed

*act done as previous directive shall be done as done this directive
Directive 2
Previous Provsion
not overdue and which are overdue by a periodup to three months.
pass loan with conditions under 1.1

overdue by a period from three-months
six-months to to
a a maximum period of one year.
maximum period of one year.
overdue by a period of more than one year.
> Principal amt. or Interest not paid within due date & overdue > 1 month
> Short term credit facility or WC loan not renewed but repayment period extended temporarily
> loan disbursed to loanee, whose loan with other B/FI are classified as Non- performing Loans
> loan extended to firm, co. or institution which has Net Loss during 2 cons. Yrs or -ve NW, even though
repayment of principal or interest is regular. Such provision shall be applicable for project under construction
only on start of commercial prodn.
> amount exceeding one arba, Multi Banking Loans not changed into Consortium Financing
> Direction of NRB when CF & condition of the project operation are weak during NRB inspecton
1 * Loans/advances of fixed receipts
* Loans/advances of Government of Nepal securities and against the collateral of Nepal Rastra Bank bonds
Note : only as Primary Collateral, if secondary/addl. Collateral, then classify as pt. 1
2 *WC Loan <= 1yr can be classified as Pass Loan if renewed
Note : WC loan where it is not regular, such loans have to be classified on
the basis of the duration of interest to be due.
> Debtor is bankrupt or declared bankrupt

> Debtor is not identified or disappears
> loan is misused
> project/ business is not in acondition to be operated or be not in operation
> Non-funded facilities like acceptance of bill, L/c, guarantee and other possible liabilities which are
converted into funded facilities as a force loan, such loan not recovered within 90 days from the date of
conversion
> Expiry of 180 days from the date of auction process due to not recovery ot case is pending with the court
under recovery process
> loan extended to loanee, who is eclisted in the blacklist of CIB
> Market price of the collateral cannnot secure the loan
> purchased or discounted bills are not recovered within ninety days from the date of conversion
> loan extended to one firm, co. or person being used by another firm, co. or person.
(However, in case of firm, co. under same group, total limit can be fixed for the same purpose)
> new loan authorized and disbursed without being mentioned while providing L/c for the payment of the
trust receipt loan
> credit card loan is not w/off within 90 days of expiry (overdue)
> Debtor providing different financial details for same date or period
( note for "misuse"
1) if the deadline of installment of the principal amount expires, remaining entire loan amount has to be
classified based on expiry of the deadline of the installment amount.
*in cases of the installment of the term loan given by licensed institution not having the facility of
engaging in overdraft transaction,
*entire loan amount has to be categorized as loss loan only if the installment amount has
crossed the deadline by a period of more than one year.
*In case the installment amount has crossed the deadline by a period of less than one
year, only such installment amount has to be classified in the loss loan with a provision of loan loss.
*However, this clause shall not be deemed to have hindered if the licensed institution wants to classify the
entire loan amount as the loss loan.
2) if deadline of loan for hydropower project, transmission line and cablecar project crosses by
more than 90 days, classified as loss loan.
a) The provisions of providing loan by mortgaging gold and silver has to be stated in the credit
policy/byelaws of the institution
b) Prior to carry out transaction of gold/silver loan, provisions relating to necessary security,
evaluation of the collateral, vault insurance and checkers have to be made;
c) *while providing loan , the collateralled gold and silver should be properly inspected
*the collateral as gold and silver of the borrower should be kept in the same pouch
*in case the collateral of a borrower is kept in different pouch or one bag containing different
pouch or loan is provided without proper inspection of gold and silver, 100% loss loan provision
is to be made
*Principal and interests of a loan shall not be allowed to be recovered having overdrawn
the current account of a customer so that the overdraft limit is crossed.
*In case the account is not settled after overdrawn of the account while recovering
principal and interest by debiting the account of the customer, the amount overdrawn
shall also be included in the loans not recovered and such loans have to be classified in
one class lower than the class to which such loans belongs.
*Licensed institution shall not normally be allowed to make available term loans with
grace period of more than one year.
* In case longer grace period has to be provided, the reasons for and bases on which such longer period has
to be granted, such details shall have to be disclosed and it shall have to be approved by the Board of
Directors at the time of approval of the loan
(1) In case a licensed institution is convinced on the following bases stated in the
written action plan submitted by the debtor, it may rescheduled or retract the
loan:-
(a) Evidence showing that documents relating to loans and security are
adequate;
(b) Bases on which the licensed institution is convinced of the possibility that
the rescheduled or restructured loans would be recovered;
(c) In addition to submission of written plan of actions for rescheduling and restructuring loans at least 25
percent of the interest due to be paid until the date of rescheduling or restructuring of such a loan has been
paid;
(2) For reestablishment and appropriate upliftment of sick industries( as published in the Nepal Gazette by
nepal government ) , as per Guideline regarding facillity for sick industries by financial sectors 2070
(issued by nrb guideline2.1); for restructuring and rescheduling, at least 25 % provision for loan loss to
be made
(3) Description of the loans classified pursuant to classes (1) and (2) has to be
separately prepared.
1) Loan Classification provision(%)

a) Pass 1
b) Watchlist * 5
c)Sub-standard 25
d) Doubtful 50
e) Loss Loan 100
(*if the conditions for listing into watchlist get better, they may be listed as pass loan)
(2) in case of restructuring or rescheduling :

a)*of pass loan, 12.5% provision
*of substandard, doubtful and loss loan, NO ADJUSTMENT can be made after it is rescheduled or
restuctured (except for the loans having regular payment for consecutive two years,then it can be
converted into pass loan)
*In case the principle and interest of installment or EMI is regular, no provision has to be made
for the following:
**if decrease in installment amount and number of installmets due to prepayment of installments
**in case of loan having adjustable(changeable) interest rate, If interest rate increases/decreases due
to which the rate of interest is increased/decreased and thereby
by the duration and installment amount is increased/decreased respectively, the installment
amount determined at the time of sanctioning the loan is not allowed to
be decreased in both cases.
c) in case of inability to pay loan as per repayment schedule by projects due to:
- increase in interest of loan provided by bank and financial institutions
-increase in other financing or production capacity
Amongst such projects,for national priority projects like hydropower, cable car, cement or other projects
related to infrastructure ,only 1% provision can be made in case of rescheduling and restructuring if follwoing
conditions are fulfilled . (Such rescheduled and restructured loans can be classified as pass loan)
*if project is operating continuously or in process of starting its operation
* Not allowed to tie income by capitalising the interest after the end of the grace period
d) 15*
*Point In case of loan loan
Advancing extended for poultryinfarming:
for investment initial/further public offering (IPO/FPO)
No bank or financial institution shall, for the first seven working days after the initial/further * if
the loan cannot be as per previous payment schedule or conditions
public offering of shares of a public limited company, advance any type of credit due to bird flu and is to be rescheduled
or restructured;
facility basedof
for the purpose onpurchasing
the borrower's
suchloan payment written policy, sufficiency of collateral and future loan
shares.
payment capacity, 1% provision can be
Provided that in case there are no share applicationmade for once. enough for full subscription as
called on in the first working days, credit facility may be made available for initial/Further
public offering
e) no from the
restructing oreighth day subject
rescheduling to the following
is allowed terms
if the loan and conditions:-
is provided using shares as collateral
(a) In case the issue manager appointed for the tasks of initial/Further public offering is a
subsidiary company of the concerned bank or financial institution, such institution
shall not be allowed to advance credit to any person, firm, company for the
purpose
(3) In case of the initial
a loan public offering.
is insured or secured by loan security fund, only 25% of the provision required to be
(b) Banks and financial
maintained for such loan institutions
is to beshall have to make available credit to the
created.
investors investing in initial/Furthe public offering having arranged for the cash margin
of at least 50 percent of the credit to be made available.
(4)
(c) Banks and financial
The maximum period institution shall not
of repayment provide
of the creditany
madetypeavailable
of loan*against
in such aPoint
manner 15* on the securityof the
memo
shall be(adhakatti)
for the period of anspecified
applicationfortoshare
be submitted
allotment forinshare purchase Act,
the Securities at the time of initial public
Rules
offering.
relating to securities. Restructuring and rescheduling of such a credit shall notinstitution
In case of providing loan in such a way, the concerned bank or financial be shall have to
make
allowed.cent percent loan loss provision.
(d) Entire procedures applicable in case of advancing other credits shall also have to
be completed while advancing this type of credit as well.
(e) Except in cases where such credit is in pass status, provision of cent percent loan
loss shall be made.
(5)* While providing loan on personal/institutional guarantee,

- description of property equal in value to the amount of the personal guarantee and in sole
ownership of the debtor and free of any claim of any one else shall compulsorily be obtained.
* Even the loans given only on the basis of personal/institutional guarantee shall also be classified
and if classified as pass, substandard and doubtful loan,then loss provision shall be made 20 percent
more in addition to the percentage prescribed for that class.
*Even in the cases where personal guarantee has been taken for the collateral of
physical(movable or immovable) property alone could not secure the loan, the provision for additional
loan and stated above has to be made.
*But no additional provision required for following loan based on personal or institutional guarantee
a. credit card loan
b. loans and advances made to the institutions referred to in sub-clause (b) of clause 4 of the Directives
No. 3, (Nepal Oil Limited , Nepal Food Corporation and Agricultural Product Company Ltd.)
c. Personal loan up to 15 lacs can be provided fulfilling following conditions:
**clearly indicated in the concerned institution's credit lending , inspection and recovery policy
**A separate product paper for such loans should be authorised by board of directors and properly
implemented
** There should be clear supporting regarding capability of borrower's source of income to repay loan
and such source should be determined from the lender's account in the bank . Also the borrower should
have taken PAN number
**Repayment schedule for payment of such loan in EMI should be made and the maximum
duration of such loan should be up to 5 years.
** Such loan cannot be provided more than 5% of total loan

d. If the loans as per point a and bare outstanding for more than 90 days , then should be classified as
loss loan and 100% provision created as required
e. details of such loans should be classified seperately
(6)* Licenced institutions have to classify loan disbursed only on the basis of the third party collateral
as per the directive and if it is classified as pass, sub-standard and doubtful, then additional 20%
provision has to be made.
*Even if the collateral of third party is taken where the loan of lender cannot be secured by his asset alone,
the above mentioned provision is applicable.
A separate details of such loans should be prepared:

**if the borrower is a natural person and the collateral is in the name of his close family
member(belonging to same house referred as-----"Ekaghar")
**if the borrower is a firm then collateral in name of the firm's proprietor, partner or his close family
member
**if the borrower is a company, then collateral in the name of the company's director, founder or his
close family member
(7) No additional loan loss provision of 20 percent shall be required to be made in the loan loss provision
referred to in sub-clause (3) above in cases of education loan and loans extended to micro-credit
financial institutions and cooperative financial institution under the deprived sector lending by banks
and financial institution on PERSONAL GUARANTEE.
(8) no restriction to classify loans and advances of higher class to lower class
in case licensed institution so wishes.
(9) in case additional provision over the minimum provision requirement is made by the licenced institutions,
such additional provision should be properly disclosed
(10)Loans/advances also includes bills purchase and discounts

No loan loss provision shall be allowed for adjustment except in the following conditions:-
(a) In case the loan is written off;
(b) In the event where repayment of loan is in installment or in partial basis, the loan
loss provision made to the extent of the loan so repaid may be written back and adjusted while maintaining
loan loss provision according to loan classification
(c) In the event of the loan is reclassified after loan rescheduling and
restructuring, if the repayment of the principal and interest of the loan so rescheduled and restructured is
regular for a consecutive period of two years
(d) if loan is repaid
(1) In case of the non-banking assets accepted by the licensed institution, cent percent
loss provisions shall be made from the date of the acceptance.
(2) In case of sale of the non-banking assets, necessary adjustment in the accounts of
loss provision maintained for such property shall immediately be made.
(3) While accepting collateral security as non-banking assets by licensed institution, the following
provisions shall be applicable while selling the non-banking assets so accepted:
(a) While accepting the collateral property of a customer as non-banking assets whose outstanding
loan amount is more than 25 lacs, the concerned party shall compulsorily be black-listed. But if less
than 25 lacs, the bank and financial institution can itself determine whether to blacklist or not
(b) Prior to auctioning the non-banking
assets in the name of the institution, it shall have to be evaluated accurately by an independent evaluator.
(c) Transparent and clear
provisions shall be made with regard to auction sale of collateral security/non-banking assets in Financial
Administration Byelaws and sales shall have to be carried out in such a manner to serve interest of the
bank or financial institution. (d) While
accepting the non-banking assets in such a manner, entire property mortgaged as collateral that could not
be sold by auction shall have to be accepted and it may not be accepted in part. (e) The
property so accepted shall have to be sold at the earliest to the extent possible. In case it is necessary for
own purpose of the licensed institution, the same shall have to be approved by the Board of Directors
and information thereof shall be made available to this Bank as well. (f)While
returning the non banking assets to its owner(before the aseet became non banking asset), the directive isnt
thought to prevent returning such non banking assets without reducing its booked value in accounts after
discussions between concerned institute and concerned owner.
(1) The Banks and financial institution having no adequate capital fund prescribed by this Bank shall not
be allowed to purchase any type of loan, credit to take on discount and to engage in CS, CP, RP and take
over without a prior approval of this Bank.
(2) The Banks and financial institution having no adequate capital fund prescribed by this Bank may
carry out CS, CP, RP and TO subject to the following restrictions:
(a) The bank/financial institution shall have to maintain the capital fund as prescribed by this
Bank even prior to carryout the CS, CP, RP and TO.
(b) The bank/financial institution shall have to make clear provisions in its loan
policy with regard to engage in transactions of CS, CP, RP and TO. Otherwise, such transaction shall not
be allowed. (c) No transaction relating to CS, CP, RP and TO shall be allowed in the last
month of a fiscal year. (d) While carrying out transaction of credit purchase, the purchaser
shall have to purchase the right to recover such credit from the customer. For that purpose, consent of the
concerned customer shall also have to be obtained.
(i) The purchaser of the credit shall have to account the credit
so purchased in loan and advances sub-title under the concerned title in its accounts.
(ii) Credit shall be purchased only after having collected
comprehensive description of the terms and conditions of the credit.
(iii) The bank/financial institution purchasing
credit shall have to collect in writing the details as to the date in which the credit was availed by the debtor,
type of the credit, condition of repayment, condition of past credit transactions, capacity of the guarantor,
condition of credit classification and so on.
(iv) The bank and financial institution purchasing the credit shall have to maintain the loan loss provision
according to the prevailing condition of the loan classification and loan loss provision.
(v) While purchasing a credit the documents showing the bases to be ensured that such credit is secured
and is profitable for the institution have to be enclosed and updated in the loan file. (vi)
Only the banks and financial institutions having the provision relating to credit purchase may enter into
transactions of credit purchase.
(e) Half-yearly statement of CS, CP, RP and TO transactions shall be sent to the concerned
Supervision Department of this Bank within fifteen days of the completion of the half-yearly period.
(3) In the event where there is a condition that the selling institution shall repurchase the
credit if the purchaser institution fails to recover the credit while entering into transaction of credit
purchase and sale, the institution purchasing the credit shall, until the selling institution repurchases the
credit, have to show such credit in its balance-sheet as a contingent liability and such contingent liability
shall,
No bankfor or
thefinancial
purposeinstitution
of calculating
shall capital fund,tobeadvance
be allowed accorded only
loan or 100 percent
accept risk-weight.
a deposit based on a financial
guarantee issued by any bank or financial institution established and being operated in the country.
(1) No bank or financial institution shall be allowed to deposit amount or enter into loan transaction with
institutions which are engaged in deposit mobilization and loan transaction in accordance with prevailing
laws other than the Banks and Financial Institutions Act, 2073.
(2) The aforesaid provision of sub-clause (1) shall not cause hindrance for the institutions
carrying out mobilisation of deposit and credit transaction under prevailing laws, other than those carrying
out credit transaction under the Banks and Financial Institutions Act, 2073, to deposit amount in licensed
bank and financial institutions and to take loan against the pledge of deposit receipt . Provided that while
advancing loan against pledge of deposit receipt, only the bank or financial institution in which the
deposit has been made has to advance such credit. In cases of credit advanced heretofore from other
bank/financial institution, except the institution having one's own deposit receipt, credit may not be advanced
renewing previous loan after the maturity date.
(3) Licensed banks and financial institutions may, while
advancing loan pledging deposit receipt and Government Bills, advance/credit/advances subject to the
credit policy/Directives of the institution and without lessening the interest rate than the coupon
rate. Provided that while advancing loan pledging the bond/securities issued by Government of Nepal, the
said provisions shall not apply.
(4) While accepting any type of deposit from any person, firm, company and other corporate body,
licensed banks, and financial institutions shall not be allowed to make available any type of financial
facility from fee/commission or the like head causing expenditure burden to the bank or financial
institution except the coupon rate to be provided to such deposit.
(KA) With regard to the loan, in the nature of margin lending to be advanced from a bank and financial
institution on the pledge of shares of the companies listed in Nepal Securities Exchange Market , the loan
may be advanced having followed the following terms and conditions:-
(1) In cases of loan to be advanced in such a manner, loan may be extended only up to the amount of 50
percent of lower of; the average closing price of the share at the latest 180 working days or prevailing
market price of the shares, whichever is lesser. Neither additional credit limit may be maintained nor
additional loan may be extended having evaluated the shares as collateral of such loan once extended.
(2) Provisions relating to margin call

(a) In case margin call has to be made due to change in market price of shares, the concerned bank or
financial institution has to monitor price and inform the debtor customer and to make margin call so that the
margin be brought within the specified limit within a period of 7 days in maximum.
*Provided that it is not necessary to make margin call in the event where price of the shares pledged as
security has fallen down by 10 percent in maximum.
*Also, margin call not required to be made in case the value of shares is 1.5 times the loan
outstanding.
(b)Upon issuance of a notice pursuant to clause (a), the concerned debtor/customer is required to deposit
the amount of margin to the concerned bank and financial institution within 35 days.
(c) In case of failure to do according to clause (b), the shares pledged as security shall be sold through the
stock exchange market and the loan shall be recovered within a period of seven days after the date of the
default.
(d) In case the loan could not be recovered pursuant to clause (c), cent percent provision shall have to be
made for such a loan.
(3) The duration of the loan extended in such a manner shall not be more than one year. If a debtor
availing the margin type lending has repaid the outstanding interest amount, up to 75 percent of the margin
type lending may be renewed. Provided
that this provision shall not be applicable in cases of shares pledged by the debtors as additional security for
the loan extended for other purposes. The concerned bank/financial institution shall have to maintain and
update necessary information, statistics and description for the loan purposes in the concerned loan file. The
shares to be taken as an additional security shall be treated only as an additional collateral.
4) No margin lending shall be allowed pledging shares of the institutions which fall
in any of the following categories:
*(a) The banks and financial institutions having not maintained capital fund ratio
according to Directives of this Bank;
(b) The institutions having negative net worth;
(c) The institutions delisted by the Nepal Stock Exchange Market Limited,
(d) The institutions not having conducted the final auditing even after
completion of one year of a fiscal year.
(5) With regard to margin lending on the pledge of shares listed with the stock exchange market,
Bank/financial institutions shall have to categorically provide in their credit policies guidelines and shall have
to fulfill entire process applicable in cases of other credits.
(6) Exception in cases where the loan extended in such a way is in pass condition, cent percent loan loss
provision shall have to be made.
(7) Banks and financial institutions may advance such loan only to the amount of its core capital in
maximum. Moreover, while advancing such loan, Banks or financial institutions may advance loan only up to
25 percent of its core capital in case of shares of one listed companies.
For this purpose, "Core Capital" means the core capital maintained based on financial description of internal
audit of the immediately preceding trimester.
(8) The Banks and financial institutions which have extended more loans than their
core capital in the past shall not be allowed to advance more loan of such nature
until the loan exposure comes down to such a limit.
(9)While advancing such a loan, banks and financial institutions shall advance:
*in case of physical shares-keeping original certificate as collateral
*in case of non-physical shares- proof of collateral as per prevailing rules
As per the necessary provisions related to the procedueres of Personal Guarantee by Nepal Security Board
and Nepal Stock Exchange limited, In case original certificate of shares not available, broker's guarantee
and share purchase receipt can be used to provide loan for one year by maintaing proper margin.(Proper
mechanism for proper maintenance of such loan should be made)
(KHA)With regard to shares taken by banks and financial institutions as collateralsecurity:
(1) Banks and financial institutions shall not be allowed to recover the loan accepting the shares of licensed
banks and financial institutions takenas collateral security.
(2) In case the loan has been recurred in the past having accepted the shares of the licensed Banks or
financial institutions, the shares so accepted shall compulsorily be sold. In cases of the shares that could not
be sold for any special reason, provision of cent percent of the amount equal to the price of the shares
so accepted shall be made.
a) make mechanism for proper risk management and control from such loan
b)*In case of loan by promoter or group of promoters holding 1% or more shares of promoter share of
Licensed bank and financial institution, one cannot use more than 50% of shares as collateral for loan.
*In case loan has been provide against above limit,the loan should be brought within the limit earlier of:
Ashad end of 2068 or actual date of payment of loan
*Bank and financial institution keeping record of collateral against which charge has been created shoulf
create charge against such shares following this provision
c) For the puropse of valuation of promoter share- 50% of the lower of the following : 50% of average
price of ordinary shares of last 180 working days or last transaction amount of such promoter shares. (Once
loan has been provided by valuation of such shares,further loan cannot be prrovided by
reevaluation of such shares)
d) Such promoter shares cannot be classified as non-banking assets and in case the payment is due by 6
months, such shares shall be sold as per the prevailing laws and under NRB's direction.
e) The duration of repayment should be decided and should not be more than a year.
f) Such loans are not allowed to be restructed or rescheduled
g) In case of such loans, except for pass loan, 100% provision for other loans to be made.
h) In case such loans is not settled within the time limit, such Promoter/director shall be requested for
blacklisting within 7 days showing the reasons by after giving 35 days notice.
i. The provisions mentioned above should be included in the byelaws or the credit/loan policy of the BFIs.
(a) In the event where the amount of bank guarantee issued by a bank or financial institution having fulfilled
the process has to be paid to the beneficiary, decision as to whether or not to give the payment shall be
made within seven days from the date of the claim. Also, in case of bank guarantee issued under
International Chamber of commerce, Uniform Rules for Demand Guarantee (URDG) , decision has to be
made under URDG.
(b) In case the institution issuing bank guarantee has to make payment to the beneficiary within seven
days of the claim submission but the institution does not make the payment without adequate reasons,
payment may be made to the beneficiary having deducted the amount from the account of the concerned
bank/financial institution in this Bank/ from an account of the bank ordered by this Bank.
(c) The contingent liability
for the amount of guarantee under a claim of payment shall have to be given 200 percent risk weight for the
purpose of calculating the capital fund ratio.
The class “A”, “B” and “C” banks and financial institutions licensed from this Bank shall use the
transaction/borrowing to be made to each other only as inter-bank transaction/borrowings (period of 7
days) and not as the regular credit facility.
Except for hire purchase loan, the purpose and /business and collateral of loan provided using immovable
asset as collateral should be within approved(own) geographical area. And if the loan is outside the
geographical area, 100% provision shall be made until such loan is recovered.
The Trust Receipt loan, Bills discounting or other similar type of import loans shall be extended only up to a
period of 120 days.(allowed upto 150 days until Asadh end 2074)
ty/collateral of cheques(not even local cheques as it can be cleared in the same day)
*Personal loans fo revolving nature can only be extended upto 75 lacs. Loans of such nature provided
before this provision to be brought within this llimit within Asadh end 2074.
* Description of such loans shall be maintained as per format of NRB's directive Form No. 2.4 and trimester
description shall be submitted to NRB's Supervision department within 35 days after the end of such time
period.
*But providing loan based on the bank's Fixed Deposit Receipt and gold silver as collateral, loan by issuing
guarantee by maintaining 100% cash margin and loan by using Nepal government and Nepal Rastra Bank's
debenture as collateral is not thought to obstruct this provision
*In case loan of Rs. 1 crore or more amount is sanctioned to any person seperately or at once, then such
person has to necessarily obtain PAN
* In case the person falls into a group to which loan of Rs. 1 crore or more loan has been provided, then the
person has to be necessarily registered in PAN even if loan less than 1 crore has been sanctioned.
(1)*One licensed institution cannot extend another licensed institution's Director, CEO or management level
officer any other loan in their personal name except educational loan, hire purchase loan, house loan or any
loan for domestic use
** But the provision shall not obstructed if loan is sanctioned against government debenture, Fixed deposit
receipts, goldsilver security or any credit card loan. The loans disbursed prior to issuance of the directive
shall be regualrised by the end of ashadh 2071.
(2)*Licensed institution cannot extend any kind of loan to any firm, company or institution where there is
majority ownership (50% or more holding) of executive or management level authority of another licensed
institution.
** in case of loan extended before this directive, such loans if provided cannot be renewed after its expiry
*The licensed banks and financial institutions shall, while disbursing an amount of the approved loan to any
company/firm or corporate body/organization, disburse the amount having opened an account in the
concerned bank or financial institution itself.
*In other cases, the amount of loan shall have to be disbursed so that it is collected in the account of
borrower ,only through an A/C payee cheque/letter/electronic means drawn in the name of the concerned
company/firm or corporate body/organization.
Environmental impact has to be analysed before providing loan to any type of industries
While making repayment schedule of loan provided to farmers, it should be made by co ordinating the time
when the crops are harvested and time when installment has to be paid as much as possible
To prevent the obligation of guarantor above the amount of guarantee given in any condition; Guarantee
amount, loan period, loan's use, main creditor, witness, guarantor's name, address and other details should
be mentioned in detail in guarantee paper.
*NRB will provide grant amount regarding such loan provided by the Nepal Government *In
case of the loan provided as above, the amount to be received as grant shall be give 0% weighted risk
,considering it as obligation of government, while calculating capital fund ratio
*After recovery of amount required to be collected in the loan investment, bank and financial institution are
required to write to the concerned office for release of the collateral
1. Following points have been issued to manage the multiple banking transaction by the customers
using working capital nature loan( overdraft loan, Working capital loan, Cash credit loan, demand loan, Trust
receipt loan, short term loan,etc. including hypothetication loan provided by "A" class institution) provided
"A" and "B" class licensed institution :
(KA) The licensed institution are required to take the self declaration made by the customer (as per NRB
Form no. 2.6) before providing or renewing loan and is required to verify such declaration against the
information obtained from Credit Information Bureau.
(KHA) Licensed institution has to abide by following rules while providing as well as renewing working
capital loan above Rs. 1 crore:
*If it is seen that the customer avails working capital loan from more than one licensed institution,then before
renewing/providing loan , there should be Paripassu agreement (equal right and obligation) between the
institutions providing loan.(Details of such loan amount, collateral details and holding over such collateral of
concerned instituition should also be declared along with details of auction, Loan recovery procedure and
dispute settlement procedure)
*While providing such loan, loan sanction limit can be specified by taking stock and receivables in
consideration as per relevant rules and own credit policy
*Such details shall be submitted to Supervision department of NRB quarterely as per form number 2.5
(GA) While availing loan below Rs. 1 Crore
* verify if loans taken form other institutions
*if taken form other institutions- Obtain No objection letter from other banks
(2) In case of working capital loan, details of Stock and receivables shall be obtained by BAFI at least within
3 months and proposal after analysis of such details shall be made and distributed amongst the institutions
involved in the Paripassu agreement.
*if stock and receivables are below the required limit- Banking institutions are required to reschedule the loan
limit and make a new loan imit.If the sanctioned amount is above limit, it should be brought within the limit
Also, if the stock is used as collateral , it shuld be completely insured
(3) while determining the limit for loan, previous year audit report, atleast next three years projected
financial statement, business plan submitted by customer shall be obtained for determining the limit.
*Grace period shall be provided if valid reason for non completion of previous year audit is provided
*Working capital loan for micro-finance and small industries/business can be provided upto 25 lakh without
taking projected financial statement
(4) Hypothetication and overdraft loan cannot be provided to "C" class institutions
5 days after end of each quarter using form no. 2.1, 2.2 and 2.3 to Supervision department of this bank
act for non compliance of directive
ealed
e as done this directive
Addition
Loan against FDR
Loans Restructured and rescheduled under point 8

Repayment schedule for payment of such loan in EMI should be made and the maximum
duration of such loan should be up to 5 years. But
licensed institution may lend revolving loan of the amount Rs. 5 Lakhs at maximum
remaining within the limit of Rs. 15 Lakhs.
In case of the loan not secured by the collateral of the borrower and for the same
purpose if the third party collateral is also taken then the above mentiojned provision
shall be applicable to the extent of the loan amount not covered by the collateral of the
borrower and third party collateral.
But incase of the EMI loans extended prior to 2069/3/29, no additional loan loss [provision shall be applicab
1. The licensed institution may sell the collateral and recover the remaining principal and interest amount fr
collateral could not be sold by the means of auction of the assets for the purpose of the recovery of the loan
collateral by itself. The collateral should be valued at the lower of the market price of the collateral or the am
preceeding the acceptance. If the market price of the collateral is less than the amount to be recovered by th
be charged to the P/L a/c as expense in the same fiscal year. The provision for the same shall be mentioned
But while valuating in such a way the amount of the interest recaivable from ammong the amou
borrower should not be recognised as income in p/l a/c untill the full settlement is done. And such amount
banking asstes.
2. In case of the non-banking assets accepted by the licensed institution, cent percent
3. In case of sale of the non-banking assets, the LLP created for such non-banking assets should be written
4.While acceptin
licensed institution, the following provisions shall be applicable while selling the non-banking assets so acc
(a) While accepting the collateral property of a customer as non-bank
more than 25 lacs, the concerned party shall compulsorily be black-listed. But if less than 25 lacs, the bank
whether to blacklist or not
banking assets in the name of the institution, it shall have to be evaluated accurately by an independent eva
(c) Transparent and clear provisions shall b
security/non-banking assets in Financial Administration Byelaws and sales shall have to be carried out in s
financial institution.
non-banking assets in such a manner, entire property mortgaged as collateral that could not be sold by auc
accepted in part. (e) The property so accepted s
possible. In case it is necessary for own purpose of the licensed institution, the same shall have to be appro
thereof shall be made available to this Bank as well.
returning the non banking assets to its owner(before the aseet became non banking asset), the directive isn
assets without reducing its booked value in accounts after discussions between concerned institute and co
(a) In case margin call has to be made due to change in market price of shares, the concerned bank or finan
the debtor customer and to make margin call so that the margin be brought within the specified limit within
*Provided that it is not necessary to make margin call in the event where price of the shares pledged as sec
in case the value of shares is 1.6 times the loan outstanding.

7. While lending such loans and borrowings the BFIs may extend only up to 25% of the
core capital at maximum. In case of the loans transferred prior to the issuance of this
directive then such loan should be brought within the limit by Poush end 2075.
Moreover, while advancing such loan, Banks or financial institutions may advance loan
only up to 10 percent of its core capital in case of shares of one listed companies. For
this purpose, "Core Capital" means the core capital maintained based on financial
details whose internal audit has been done in the preceding trimester.
b)*In case of loan by promoter or group of promoters holding 1% or more shares of promoter
share of Licensed bank and financial institution, one cannot use more than 50% of shares as
collateral for loan. *Bank and
financial institution keeping record of collateral against which charge has been created should
create charge against such shares following this provision
h) In case such loans is not settled within the time limit, then the BFIs shall request the
CIB to include such promoter/director in black list within 7 days after 35 days of notice
period has elasped. Such provision shall be mentioned in Loan Deeds at the time of
extending loans to the borrower.
(a) In the event where the amount of bank guarantee issued by a bank or financial
institution having fulfilled the process has to be paid to the beneficiary, payment shall
be made within seven days from the date of the claim. Also, in case of bank guarantee
issued under International Chamber of commerce, Uniform Rules for Demand
Guarantee -758 (URDG-758) , decision has to be made under URDG.
The Trust Receipt loan, Bills discounting or other similar type of import loans shall be
extended only up to a period of 120 days.
23. Overdarfts and Personal loans whose purpose has not been disclosed
The BFIs can disburse the overdraft loan and the personal loan whose purpose has not
been disclosed not exceeding NPR. 50 Lakhs. In case of such loans disbursed prior to
the issuance of this directives shall be brought within the limit within the Poush end
2075. BFIs shall present the quarterly report of the personal loans whose purpose has
not been disclosed in the format prescribed in form no. 2.4 of the directive within 15
days of the end of the quarter to the supervisory department of the bank. This
provision shall not be deemed to prohibit the BFIs from extending the loans against the
Fixed Deposit Receipt and gold/silver, issuing bail at 100% cash margin as well as
extending loans against the security of NRB Security bills.
But the provision shall not obstructed if loan is sanctioned against government
debenture, Fixed deposit receipts, goldsilver security or any credit card loan.
31. Procedure for providing interest free loan through group investment to earthquake
victims for construction of house, 2074
As included in the procedure 2.3, if the BFIs make demand for interest of the loans
extended by BFIs, insurance as well as security fees/charges, the banking office of the
bank shall make the payment from the fund created by GON.
32. Tax clearance/Deposit certificate
BFIs must obtain latest tax clearance certificate and/or updated tax clearance/ deposit
certificate or E-statement providing loan or renewal of the loan to the borrower.
33. Credit Rating
BFI shall base the credit rating by the credit rating agency by the loanee orgatnization
in the case of the loanee utilizing loan amounting NPR. 50 crore or more.
34. *After recovery of amount required to be collected in the loan investment, bank and
financial institution are required to write to the concerned office for release of the collat
35. Provision related to working capital nature loan
1. Following points have been issued to manage the multiple banking transaction by
the customers using working capital nature loan( overdraft loan, Working capital loan,
Cash credit loan, demand loan, Trust receipt loan, short term loan,etc. and including
hypothetication loan provided by "A" class institution)
(KA) The licensed institution are required to take the self declaration made by the
customer (as per NRB Form no. 2.6) before providing or renewing loan and is required
to verify such declaration against the information obtained from Credit Information
Bureau.
(KHA) Licensed institution has to abide by following rules while providing as well as
renewing working capital loan above Rs. 1 crore:
*If it is seen that the customer avails working capital loan from more than one licensed
institution,then before renewing/providing loan , there should be Paripassu agreement
(equal right and obligation) between the institutions providing loan.(Details of such
loan amount, collateral details and holding over such collateral of concerned
instituition should also be declared along with details of auction, Loan recovery
procedure and dispute settlement procedure)
*While providing such loan, loan sanction limit can be specified by taking stock and
receivables in consideration as per relevant rules and own credit policy
*Such details shall be submitted to Supervision department of NRB quarterely as per

form number 2.5
(GA) While availing loan below Rs. 1 Crore
* verify if loans taken form other institutions
*if taken form other institutions- Obtain No objection letter from other banks
(2) In case of working capital loan, details of Stock and receivables shall be obtained
by BAFI at least within 3 months and proposal after analysis of such details shall be
made and distributed amongst the institutions involved in the Paripassu agreement.
*if stock and receivables are below the required limit- Banking institutions are required
to reschedule the loan limit and make a new loan imit.If the sanctioned amount is
above limit, it should be brought within the limit. Details of current assets and liabilities
submitted by the loanee having working capital nature loan more than NPR. 25 Lacs
shall be approved by the auditor.
Also, if the stock is used as collateral , it shuld be completely insured
(3) while determining the limit for loan, previous year audit report, atleast next three years
projected financial statement, business plan submitted by customer shall be obtained for
determining the limit.
*Grace period shall be provided if valid reason for non completion of previous year audit is
provided
*Working capital loan for micro-finance and small industries/business can be provided upto
NPR. 50 lakh without taking projected financial statement
(4) Hypothetication and overdraft loan cannot be provided to "C" class institutions
36. Licensed institutions availing Multiple banking loan of Rs. 1 Arba or more shall be
converted into Consortium loan. Loans not converted into Consortium loan as per this
provision shall be kept under watchlist. However this provision is not compulsory in case of
micro finance loan provided under deprived sector loan. Similarly, consortium shall not be
necessary for loan upto 50% of purchase price of fixed assets as collateral such as vehicles,
mechinery covering insurance whole amount of purchase price.
37.Loan upto 20 Lacs may be provided for agricultural and animal husbandary
business ,small and medium business,and earninings generating activities in
earthquake affected area based on the repayment capacity of the loanee with the
collateral of land not having the access of motor road.
38. Loan upto 15 Lacscan be provided for coffee, orange, tea and other agricultural
business and animal husbandary and other milk product business using the probable
project as collateral
39. Provision regarding recovery of principaland interest of loans:
first interest shall be recovered, then remaining amount shall be adjusted with principal
amount.
However these shall not compulsorily be aplicable in case of restructured and
resheduled loans.
capitalization of interest of moratorium period of project loan is not allowed.However

following loans invevested in national prorities sector are allowed with approval of NRB
Hydroelectricity production, transmission and distribution,
Industry produciny clinker and cement using local raw materials,
Medicine industy,
Cablecar industry,
industru producing sugar,
Dairy related industry,
Medical college with approval fromrelated entity of Nepal gevernment,
Deluxe hotel Repatriting foreign curruncy earnings.
41. details regarding loan provision within 15 days after end of each quarter using form
no. 2.1, 2.2 and 2.3 to Supervision department of this bank
42. Previous Unified directive has been repealed

*act done as previous directive shall be done as done this directive
* Loans/advances of Government of Nepal securities and against the collateral of Nepal Rastra Bank bonds
Misuse of loan under point 3 refers the use of loan borrowed for a
purpose for any other purpose , the income generated from the project
and business is not used for the purpose of repayment of loan and used
for any other purpose and if the auditor during audit and the supervisor
during supervision proves that the loan has been mis used then the loan
should be deemed to have been misused.
s [provision shall be applicable untill the repayment of final installment.
rincipal and interest amount from the sale of such collateral. In case the
ose of the recovery of the loan the licensed institution should accept the
rice of the collateral or the amount to be recovered by the bank up to the day
amount to be recovered by the bank then the amount remaining short shall
the same shall be mentioned in the accounting policies.
vable from ammong the amount to be recovered by the bank from the
nt is done. And such amount should be transfered to the loss from the Non
percent
king assets should be written off/ necessray adjustment should be made.

4.While accepting collateral security as non-banking assets by
he non-banking assets so accepted:
rty of a customer as non-banking assets whose outstanding loan amount is
if less than 25 lacs, the bank and financial institution can itself determine
(b) Prior to auctioning the non-
urately by an independent evaluator.
nt and clear provisions shall be made with regard to auction sale of collateral
all have to be carried out in such a manner to serve interest of the bank or
(d) While accepting the
that could not be sold by auction shall have to be accepted and it may not be
e) The property so accepted shall have to be sold at the earliest to the extent
e same shall have to be approved by the Board of Directors and information
(f)While
nking asset), the directive isnt thought to prevent returning such non banking
en concerned institute and concerned owner.
, the concerned bank or financial institution has to monitor price and inform
thin the specified limit within a period of 7 days in maximum.
e of the shares pledged as security has fallen down by 20 percent in maximum.
*Also, margin call not required to be made
The loan of amount up to Rs. 10 But the loan against the
Lakhs at maximium with enough
security
Changes
not overdue and which are overdue by a periodup to one

months.
which are overdue by a period of one month and not

exceeding the period of three months.
The licensed institution sh

Incase of working capital
The licensed institution should renew the loans only after the assessment of repayment capacity of the borrower, future cash fl
Incase of working capital loans whose interest has not been received on a timely basis should be classified on the basis of the
orrower, future cash flow,source of income and similar other basic factors of the renewal of loans.
ied on the basis of the default of payment iof interest
Directuve No. 2 Provisions Relating to Classification of Loans/advances and Loan Losses
2.1 Classification of loans/advances
2.1.1 Conditions for Watch-List
2.2 Additional provision for Pass Loan
2.3 Additional Provisions Relating to Loss Loans
4) In cases of the term loans extended in installments

(Note: For the purpose of this clause "term loan" means a
credit/advances made available having fixed the
repayment period of more than one year.)
5) Provisions Relating to Gold/Silver Loan
6) Principal and Interest not allowed to be recovered

crossing the overdraft limit:
(Provided that, this provision shall not be deemed to

prohibit to recover the principal and interest having
debited the balance in an account of the customer)
7) Provisions Relating to Grace (Moratorium) Period
(Grace period: Period between Date in which loan is

provided to date of start of payment of installment)
8) Provisions Relating to Rescheduling and Restructuring of

Loans
("rescheduling": process of
extending time limit of repayment of the loan availed by
customer . "restructuring": the process of
changing the nature or terms and conditions of altering the
restrictions on or changing the time limit of the credit
facilities
9. Provision to be maintained for loan loss
(Note: such restructured and rescheduled loans can be

classified as pass loan)
(Note: such restructured and rescheduled loans can be
Note: details of such loans should be classified seperately
(No additional provision required

in case of loans before this provision, upto asadh 2071 and
in case of term loan, upto final installment)
(Note: Loan loss provision made for performing loan shall be
treated as general loan loss provision and that for non-
performing loans shall be treated as specific loan loss
provision. )
10.Conditions for Adjustment in loan loss provision
11.Loss Provisions and Auction of Non-banking assets

12. Provisions Relating to Credit Sale/Purchase/Repurchase
and Takeover (CS/CP/RP/TO)
13. Prohibition on advancing loan and accepting deposit

based on financial guarantee
14. Provisions Relating to Deposit and Loan Transaction
16. Loans to be advanced on security of shares in the

nature of margin lending
on of Loans/advances and Loan Losses
> Pass
> Watch List
> Sub-Standard
> Doubtful
> Loss
> Principal amt. or Interest not paid within due date & overdue > 1 month
> Short term credit facility or WC loan not renewed but repayment period extended temporarily
> loan disbursed to loanee, whose loan with other B/FI are classified as Non- performing Loans
> loan extended to firm, co. or institution which has Net Loss during 2 cons. Yrs or -ve NW, even though repayment of principa
> under pt. no. 33, Multi Banking Loans(?????) not changed into Consortium Financing
> Direction of NRB when CF & condition of the project operation are weak during NRB inspecton
1 > Loans/advances of fixed receipts

> Loans/advances of Government of Nepal securities and against the collateral of Nepal Rastra Bank bonds
Note : only as Primary Collateral, if secondary/addl. Collateral, then classify as pt. 1
2 > WC Loan <= 1yr can be classified as Pass Loan if renewed

(requirement for renewal shall be analyzed & ensure repayment-
Note : WC loan where intt is not regular, such loans have to be classified on
the basis of the duration of interest to be due.
> Debtor is bankrupt or declared bankrupt
> Debtor is not identified or disappears
> loan is misused
> project/ business is not in acondition to be operated or be not in opertion
> Non-funded facilities like acceptance of bill, L/c, guarantee and other possible liabilities which are converted into funded fac
> Expiry of 180 days from the date of auction process due to not recovery ot case is pending with the court under recovery pro
> loan extended to loanee, who is eclisted in the blacklist of CIB
> Market price of the collateral cannnot secure the loan
> purchased or discounted bills are not recovered
within ninety days
> loan extended tofrom the date
one firm, ofperson
co. or conversion
being used by another firm, co. or person.
(However, in case of firm, co. under same group, total limit can be measured
> new loan authorized and disbursed without being mentioned while providing L/c for the payment of the trust receipt loan
> credit card loan is not w/off within 90 days of expiry
> Debtor providing different financial statement for same date or period
( note for "misuse"
1) if the deadline of installment of the principal amount expires, remaining entire loan amount has
to be classified based on expiry of the deadline of the installment amount.
*in cases of the installment of the term loan given by licensed institution not having the facility of
engaging in overdraft transaction,
*entire loan amount has to be categorized as loss loan only if the installment amount has
crossed the deadline by a period of more than one year.
*In case the installment amount has crossed the deadline by a period of less than
one year, only such installment amount has to be classified in the loss loan with a provision of loan
loss. *However, this clause shall not be deemed to have hindered if the licensed institution wants
to classify the entire loan amount as the loss loan.
2) if deadline of loan for hydropower project, transmission line and cablecar project crosses by
more than 90 days, classified as loss loan.
a) The provisions of providing loan by mortgaging gold and silver has to be stated in the credit
policy/byelaws of the institution
b) Prior to carry out transaction of gold/silver loan, provisions relating to necessary
security, evaluation of the collateral, vault insurance and checkers have to be made;
c) *while providing loan , the collateralled gold and silver should be properly inspected
*the collateral as gold and silver of the borrower should be kept in the same pouch
*in case the collateral of a borrower is kept in different pouch or one bag containing different
pouch or loan is provided without proper inspection of gold and silver, 100% loss loan provision
is to be made
*Principal and interests of a loan shall not be allowed to be recovered having overdrawn
the current account of a customer so that the overdraft limit is crossed.
*In case the account is not settled after overdrawn of the account while recovering
principal and interest by debiting the account of the customer, the amount overdrawn
shall also be included in the loans not recovered and such loans have to be classified in
one class lower than the class to which such loans belongs.
*Licensed institution shall not normally be allowed to make available term loans with
grace period of more than one year.
* In case longer grace period has to be provided, the reasons for and bases on which such longer
period has to be granted, such details shall have to be disclosed and it shall have to be approved by
the Board of Directors at the time of approval of the loan
(1) In case a licensed institution is convinced on the following bases stated in the
written action plan submitted by the debtor, it may rescheduled or retract the
loan:-
(a) Evidence showing that documents relating to loans and security are
adequate;
(b) Bases on which the licensed institution is convinced of the possibility that
the rescheduled or restructured loans would be recovered;
(c) In addition to submission of written plan of actions for rescheduling and restructuring loans at
least 25 percent of the interest due to be paid until the date of rescheduling or restructuring of
such a loan has been paid;
(2) For reestablishment and appropriate upliftment of sick industries( as published in the Nepal
Gazette by nepal government ) , as per Guideline regarding facillity for sick industries by financial
sectors 2070 (issued by nrb guideline2.1); for restructuring and rescheduling, at least 25 %
provision for loan loss to be made
(3) Description of the loans classified pursuant to classes (1) and (2) has to be
separately prepared.
1) Loan Classification provision(%)

a) Pass 1
b) Watchlist * 5
c)Sub-standard 25
d) Doubtful 50
e) Loss Loan 100
(*if the conditions for listing into watchlist get better, they may be listed as pass loan)
(2) in case of restructuring or rescheduling :

a)*of pass loan, 12.5% provision
*of substandard, doubtful and loss loan, NO ADJUSTMENT can be made after it is rescheduled or
restuctured (except for the loans having regular payment for consecutive two years,then it can
be converted into pass loan)
*In case the principle and interest of installment or EMI is regular, no provision has to be made
for the following:

**if decrease in installment amount and number of installmets due to prepayment of
installments
**in case of loan having adjustable(changeable) interest rate, If interest rate increases/decreases
due to which the rate of interest is increased/decreased and thereby
by the duration and installment amount is increased/decreased respectively, the installment
amount determined at the time of sanctioning the loan is not allowed to
be decreased in both cases.
c) in case of inability to pay loan as per repayment schedule by projects due to:
- increase in interest of loan provided by bank and financial institutions
-increase in other financing or production capacity
Amongst such projects,for national priority projects like hydropower, cable car, cement or other
projects related to infrastructure ,only 1% provision can be made in case of rescheduling and
restructuring if follwoing conditions are fulfilled . (Such rescheduled and restructured loans can be
*if project is operating continuously or in process of starting its operation

* Not allowed to tie income by capitalising the interest after the end of the grace period
d) In case of loan extended for poultry farming:
* if the
loan cannot be as per previous payment schedule or conditions due to bird flu and is to be
rescheduled or restructured; based on the borrower's loan payment written policy, sufficiency of
collateral and future loan payment capacity, 1% provision can be made for once.
e) no restructing or rescheduling is allowed if the loan is provided using shares as collateral
(3) In case a loan is insured or secured by loan security fund, only 25% of the provision required to
be maintained for such loan is to be created.
(4) Banks and financial institution shall not provide any type of loan*against Point 15* on the
securityof the memo (adhakatti) of an application to be submitted for share purchase at the time
of initial public offering. In case of providing loan in such a way, the concerned bank or financial
institution shall have to make cent percent loan loss provision.
*Point 15* Advancing loan for investment in initial/further public offering (IPO/FPO)
No bank or financial institution shall, for the first seven working days after the initial/further
public offering of shares of a public limited company, advance any type of credit
facility for the purpose of purchasing such shares.
Provided that in case there are no share application enough for full subscription as
called on in the first working days, credit facility may be made available for initial/Further
public offering from the eighth day subject to the following terms and conditions:-
(a) In case the issue manager appointed for the tasks of initial/Further public offering is a
subsidiary company of the concerned bank or financial institution, such institution
shall not be allowed to advance credit to any person, firm, company for the
purpose of the initial public offering.
(b) Banks and financial institutions shall have to make available credit to the
investors investing in initial/Furthe public offering having arranged for the cash margin
of at least 50 percent of the credit to be made available.
(c) The maximum period of repayment of the credit made available in such a manner
shall be for the period specified for share allotment in the Securities Act, Rules
relating to securities. Restructuring and rescheduling of such a credit shall not be
allowed.
(d) Entire procedures applicable in case of advancing other credits shall also have to
be completed while advancing this type of credit as well.
(e) Except in cases where such credit is in pass status, provision of cent percent loan
loss shall be made.
(5)* While providing loan on personal/institutional guarantee,
- description of property equal in value to the amount of the personal guarantee and in
sole ownership of the debtor and free of any claim of any one else shall compulsorily
be obtained. * Even the loans given only on the basis of personal/institutional guarantee
shall also be classified and if classified as pass, substandard and doubtful loan,then loss provision
shall be made 20 percent more in addition to the percentage prescribed for that class.
*Even in the cases where personal guarantee has been taken
for the collateral of physical(movable or immovable) property alone could not secure the loan,
the provision for additional loan and stated above has to be made.
*But no additional provision required for following loan based on personal or institutional guarantee
a. credit card loan
b. loans and advances made to the institutions referred to in sub-clause (b) of clause 4 of the
Directives No. 3, (Nepal Oil Limited , Nepal Food Corporation and Agricultural Product Company
Ltd.)
c. Personal loan up to 15 lacs can be provided fulfilling following conditions:

**clearly indicated in the concerned institution's credit lending , inspection and recovery policy
**A separate product paper for such loans should be authorised by board of directors and
properly implemented
** There should be clear supporting regarding capability of borrower's source of income to
repay loan and such source should be determined from the lender's account in the bank . Also
the borrower should have taken PAN number
**Repayment schedule for payment of such loan in EMI should be made and the maximum
duration of such loan should be up to 5 years.
** Such loan cannot be provided more than 5% of total loan

d. If the loans as per point a and bare outstanding for more than 90 days , then should be
classified as loss loan and 100% provision created as required
e. details of such loans should be classified seperately
(6)* Licenced institutions have to classify loan affected by the collateral of third party as per the
directive and if it is classified as pass, sub-standard and doubtful, then additional 20% provision
has to be made.
*Even if the collateral of third party is taken where the loan of lender cannot be secured by his
asset alone, the above mentioned provision is applicable.
EXCEPTIONS:
**if the borrower is a natural person and the collateral is in the name of his close family
member(belonging to same house referred as-----"Ekaghar")
**if the borrower is a firm then collateral in name of the firm's proprietor, partner or his close
family member
**if the borrower is a company, then collateral in the name of the company's director, founder
or his close family member
(7) No additional loan loss provision of 20 percent shall be required to be made in the loan loss
provision referred to in sub-clause (3) above in cases of education loan and loans extended to
micro-credit financial institutions and cooperative financial institution under the deprived sector
lending by banks and financial institution on PERSONAL GUARANTEE.
(8) no restriction to classify loans and advances of higher class to lower class
in case licensed institution so wishes.
(9) in case additional provision over the minimum provision requirement is made by the licenced
institutions, such additional provision should be properly disclosed
(10)Loans/advances also includes bills purchase and discounts
No loan loss provision shall be allowed for adjustment except in the following conditions:-
(a) In case the loan is written off;
(b) In the event where repayment of loan is in installment or in partial basis,
the loan loss provision made to the extent of the loan so repaid may be written back and adjusted
while maintaining loan loss provision according to loan classification
(c) In the event of the loan is reclassified after loan
rescheduling and restructuring, if the repayment of the principal and interest of the loan so
rescheduled and restructured is regular for a consecutive period of two years
(d) if loan is repaid
(1) In case of the non-banking assets accepted by the licensed institution, cent percent
(2) In case of sale of the non-banking assets, necessary adjustment in the accounts of
loss provision maintained for such property shall immediately be made.
(3) While accepting collateral security as non-banking assets by licensed institution, the following
provisions shall be applicable while selling the non-banking assets so accepted:
(a) While accepting the collateral property of a customer as non-banking assets whose
outstanding loan amount is more than 25 lacs, the concerned party shall compulsorily be black-
listed. But if less than 25 lacs, the bank and financial institution can itself determine whether to
blacklist or not (b) Prior to
auctioning the non-banking assets in the name of the institution, it shall have to be evaluated
accurately by an independent evaluator.
(c) Transparent and clear provisions shall be made with regard to auction sale of
collateral security/non-banking assets in Financial Administration Byelaws and sales shall have to
be carried out in such a manner to serve interest of the bank or financial institution.
(d) While accepting the non-banking assets in such a manner,
entire property mortgaged as collateral that could not be sold by auction shall have to be accepted
and it may not be accepted in part. (e) The property so accepted shall have to be sold
at the earliest to the extent possible. In case it is necessary for own purpose of the licensed
institution, the same shall have to be approved by the Board of Directors and information thereof
shall be made available to this Bank as well. (f)While returning the non
banking assets to its owner(before the aseet became non banking asset), the directive isnt thought
to prevent returning such non banking assets without reducing its booked value in accounts after
discussions between concerned institute and concerned owner.
(1) The Banks and financial institution having no adequate capital fund prescribed by this Bank
shall not be allowed to purchase any type of loan, credit to take on discount and to engage in CS,
CP, RP and take over without a prior approval of this Bank.
(2) The Banks and financial institution having no adequate capital fund
prescribed by this Bank may carry out CS, CP, RP and TO subject to the following restrictions:
(a) The bank/financial institution shall have to maintain
the capital fund as prescribed by this Bank even prior to carryout the CS, CP, RP and TO.
(b) The bank/financial institution shall
have to make clear provisions in its loan policy with regard to engage in transactions of CS, CP, RP
and TO. Otherwise, such transaction shall not be allowed. (c) No transaction relating to
CS, CP, RP and TO shall be allowed in the last month of a fiscal year. (d) While
carrying out transaction of credit purchase, the purchaser shall have to purchase the right to
recover such credit from the customer. For that purpose, consent of the concerned customer shall
also have to be obtained.
(i) The purchaser of the credit shall have to account the credit so purchased in
loan and advances sub-title under the concerned title in its accounts.
(ii) Credit shall be purchased only after having collected
comprehensive description of the terms and conditions of the credit.
(iii) The bank/financial institution
purchasing credit shall have to collect in writing the details as to the date in which the credit was
availed by the debtor, type of the credit, condition of repayment, condition of past credit
transactions, capacity of the guarantor, condition of credit classification and so on. (iv)
The bank and financial institution purchasing the credit shall have to maintain the loan loss
provision according to the prevailing condition of the loan classification and loan loss provision.
(v) While purchasing a credit the documents showing the bases to be ensured that
such credit is secured and is profitable for the institution have to be enclosed and updated in the
loan file. (vi) Only the banks and financial institutions having the provision
relating to credit purchase may enter into transactions of credit purchase.
(e) Half-yearly statement of CS, CP, RP and TO
transactions shall be sent to the concerned Supervision Department of this Bank within fifteen days
of the completion of the half-yearly period. (3) In the event where there is a
condition that the selling institution shall repurchase the credit if the purchaser institution fails to
recover the credit while entering into transaction of credit purchase and sale, the institution
purchasing the credit shall, until the selling institution repurchases the credit, have to show such
credit in its balance-sheet as a contingent liability and such contingent liability shall, for the
purpose of calculating capital fund, be accorded only 100 percent risk-weight.
(4) In case of credit provided during inter-bank transactions between any bank and
No bank or financial institution shall be allowed to advance loan or accept a deposit based on a
financial guarantee issued by any bank or financial institution established and being operated in
the country.
(1) No bank or financial institution shall be allowed to deposit amount or enter into loan
transaction with institutions which are engaged in deposit mobilization and loan transaction in
accordance with prevailing laws other than the Banks and Financial Institutions Act, 2073.
(2) The aforesaid provision of sub-clause (1) shall not
cause hindrance for the institutions carrying out mobilisation of deposit and credit transaction
under prevailing laws, other than those carrying out credit transaction under the Banks and
Financial Institutions Act, 2073, to deposit amount in licensed bank and financial institutions and
to take loan against the pledge of deposit receipt . Provided that while advancing loan against
pledge of deposit receipt, only the bank or financial institution in which the deposit has been
made has to advance such credit. In cases of credit advanced heretofore from other bank/financial
institution, except the institution having one's own deposit receipt, credit may not be advanced
renewing previous loan after the maturity date.
(3) Licensed banks and financial institutions may, while
advancing loan pledging deposit receipt, advance/credit/advances subject to the credit
policy/Directives of the institution and without lessening the interest rate than the coupon rate.
Provided that while advancing loan pledging the bond/securities issued by Government of Nepal,
the said provisions shall not apply. (4) While accepting any
type of deposit from any person, firm, company and other corporate body, licensed banks, and
financial institutions shall not be allowed to make available any type of financial facility from
fee/commission or the like head causing expenditure burden to the bank or financial institution
except the coupon rate to be provided to such deposit.
(KA) With regard to the loan, in the nature of margin lending to be advanced from a bank and
financial institution on the pledge of shares of the companies listed in Nepal Securities Exchange
Market , the loan may be advanced having followed the following terms and conditions:-
(1) In cases of loan to be advanced in such a manner, loan may be extended only up to the amount
of 50 percent of lower of; the average closing price of the share at the latest 180 working days or
prevailing market price of the shares, whichever is lesser. Neither additional credit limit may be
maintained nor additional loan may be extended having evaluated the shares as collateral of such
loan once extended.

(a) In case margin call has to be made due to change in market price of shares, the concerned bank
or financial institution has to monitor price and inform the debtor customer and to make margin
call so that the margin be brought within the specified limit within a period of 7 days in maximum.
*Provided that it is not necessary to make margin call in the event where price of the shares
pledged as security has fallen down by 10 percent in maximum.
*Also, margin call not required to be made in case the value of shares is
1.5 times the loan outstanding.
(b)Upon issuance of a notice pursuant to clause (a), the concerned debtor/customer is required to
deposit the amount of margin to the concerned bank and financial institution within 35 days.
(c) In case of failure to do according to clause (b), the shares pledged as security shall be sold
through the stock exchange market and the loan shall be recovered within a period of seven days
after the date of the default.
(d) In case the loan could not be recovered pursuant to clause (c), cent percent provision shall have
to be made for such a loan.
(3) The duration of the loan extended in such a manner shall not be more than one year. If a
debtor availing the margin type lending has repaid the outstanding interest amount, up to 75
percent of the margin type lending may be renewed.
Provided that this provision shall not be applicable in cases of shares pledged by the
debtors as additional security for the loan extended for other purposes. The concerned
bank/financial institution shall have to maintain and update necessary information, statistics and
description for the loan purposes in the concerned loan file. The shares to be taken as an additional
security shall be treated only as an additional collateral.
4) No margin lending shall be allowed pledging shares of the institutions which fall
in any of the following categories:
*(a) The banks and financial institutions having not maintained capital fund ratio
according to Directives of this Bank;
(b) The institutions having negative net worth;
(c) The institutions delisted by the Nepal Stock Exchange Market Limited,
(d) The institutions not having conducted the final auditing even after
completion of one year of a fiscal year.
(5) With regard to margin lending on the pledge of shares listed with the stock exchange market,
Bank/financial institutions shall have to categorically provide in their credit policies guidelines and
shall have to fulfill entire process applicable in cases of other credits.
(6) Exception in cases where the loan extended in such a way is in pass condition, cent percent loan
loss provision shall have to be made.
(7) Banks and financial institutions may advance such loan only to the amount of its core capital in
maximum. Moreover, while advancing such loan, Banks or financial institutions may advance loan
only up to 25 percent of its core capital in case of shares of one listed companies.
For this purpose, "Core Capital" means the core capital maintained based on financial
description of internal audit of the immediately preceding trimester.
(8) The Banks and financial institutions which have extended more loans than their
core capital in the past shall not be allowed to advance more loan of such nature
until the loan exposure comes down to such a limit.
(9)While advancing such a loan, banks and financial institutions shall advance:
*in case of physical shares-keeping original certificate as collateral
*in case of non-physical shares- proof of collateral as per prevailing rules
As per the necessary provisions related to the procedueres of Personal Guarantee by Nepal
Security Board and Nepal Stock Exchange limited, In case original certificate of shares not available,
broker's guarantee and share purchase receipt can be used to provide loan for one year by
maintaing proper margin.(Proper mechanism for proper maintenance of such loan should be made)
(KHA)With regard to shares taken by banks and financial institutions as collateralsecurity:

(1) Banks and financial institutions shall not be allowed to recover the loan accepting the shares of
licensed banks and financial institutions takenas collateral security.
(2) In case the loan has been recurred in the past having accepted the shares of the licensed Banks
or financial institutions, the shares so accepted shall compulsorily be sold. In cases of the shares
that could not be sold for any special reason, provision of cent percent of the amount equal to the
price of the shares so accepted shall be made.
not overdue and which are overdue by a period
up to three months.
pass loanby
overdue with conditions
a period from under 1.1 to a
six-months
maximum
overdue byperiod of one
a period fromyear.
six-months to a
maximum period of one year.
overdue by a period of more than one year.
> Performing Loans
W, even though repayment of principal or interest is regular. Such provision shall be applicable for project under construction only on start
Rastra Bank bonds
> capacity for loan repayment

> future CF
> income source
s which are converted into funded facilities as a force loan, such loan not recovered within 90 days from the date of conversion
ding with the court under recovery process
e payment of the trust receipt loan

nal guarantee
overy policy
> Non- Performing Loans (incl. Rescheduled & Restructured)
t under construction only on start of commercial prodn.
the date of conversion

Directive 2

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Directive 2

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1.

> Watch List

1.1 Conditions for Watch-List

2. Additional provision for Pass Loan

3. Additional Provisions Relating to Loss Loans

5) Provisions Relating to Gold/Silver Loan

6) Principal and Interest not allowed to be

(Provided that, this provision shall not be deemed

7) Provisions Relating to Grace (Moratorium) Perio

(Grace period: Period between Date in which loan

("rescheduling": process of extending time

9. Provision to be maintained for loan loss

(Note: such restructured and rescheduled loans can

(No additional provision required

(Note: Loan loss provision made for performing loan

11.Loss Provisions and Auction of Non-banking ass

13. Prohibition on advancing loan and accepting

16. Loans to be advanced on security of shares in

(If the loan is unsecured due to fall in market value of

18) With regard to Bank Guarantee

20) Advancing loans against immovable property

21) Trust Receipt Loan:

23. Revolving nature personal loans :

24. Borrower to obtain PAN

25.In case of loans provided to risk

27. loan to be provided after analysis of

28. Related to Payment schedule

29. If guarantee given , liability only upto the

30. "Procedure regarding interest grant for

31. Related to collateral release

32. Provision related to working capital nature

35. Loan upto 10 lacs can be provided for coffee,

36. BAFI to follow Financial Rehabilitation fund

39. Previous Unified directive has been repealed

not overdue and which are overdue by a periodup to three months.

pass loan with conditions under 1.1

1 * Loans/advances of fixed receipts

> Debtor is bankrupt or declared bankrupt

1) Loan Classification provision(%)

(2) in case of restructuring or rescheduling :

(5)* While providing loan on personal/institutional guarantee,

** Such loan cannot be provided more than 5% of total loan

A separate details of such loans should be prepared:

(10)Loans/advances also includes bills purchase and discounts

(2) Provisions relating to margin call

act for non compliance of directive

Loan against FDR

Loans Restructured and rescheduled under point 8

in case the value of shares is 1.6 times the loan outstanding.

32. Tax clearance/Deposit certificate

35. Provision related to working capital nature loan

*Such details shall be submitted to Supervision department of NRB quarterely as per

capitalization of interest of moratorium period of project loan is not allowed.However

42. Previous Unified directive has been repealed

king assets should be written off/ necessray adjustment should be made.

not overdue and which are overdue by a periodup to one

which are overdue by a period of one month and not

The licensed institution sh

2.1 Classification of loans/advances

2.1.1 Conditions for Watch-List

2.2 Additional provision for Pass Loan

2.3 Additional Provisions Relating to Loss Loans