Amid the continuing agitation of the private sector, Nepal Rastra Bank (NRB) is considering making amendments to the Guidelines on Working Capital Loans. The guidelines have aimed to limit the working capital loans to private firms making provisions that firms would get such loans based on their annual transactions only. Major private sector bodies such as the Federation of Nepalese Chambers of Commerce and Industry (FNCCI) and the Confederation of Nepalese Industries (CNI) have been protesting against the guidelines saying that it has hit their business at a time when they grappling with higher interest rates and a sharp slowdown in economic activities. The central bank implemented the guidelines starting on Oct 18 this year. The essence of bringing working capital loan guidelines was to stop the misuse of the bank money taken to meet short-term commercial needs for an unlimited period of time and outside of the purpose. The central bank has sought to discourage practices of misuse of working capital loans, a significant portion of which businesspersons use to invest in real estate and the stock market, after getting such loans from banks and financial institutions.

A month later, the central bank on Nov 16 sought advice from the stakeholders by Dec 26 if there is any problem to implement the provisions of the guidelines. In its first quarterly review of the current fiscal year’s monetary policy, the central bank also promised to make necessary changes based on suggestions.

“We have already sought suggestions from the recommendations,” a senior NRB official said. “We will address the problems through the monetary policy review of the second quarter of this fiscal year.” Though the private sector wants the implementation of guidelines to be different by at least two years, the NRB has no such plans. The NRB is of the view that the main motive behind introducing the working capital guidelines is to deter the firms from diverting the loans in other areas than their business purposes. “The suggestions we have sought is not to suspend or defer the implementation of the guidelines,” another NRB official said under the condition of anonymity. “We are just asking the banks and financial institutions about the status of implementation and the problems in implementing it.” According to the official, based on the status of implementation, necessary revisions might be made to the guidelines. “Introducing the guidelines was necessary because we found misuse of working capital loans.” Business community members have been demanding that implementation of the guidelines is suspended for at least two years. In a press meet on Nov 30, FNCCI termed the Guidelines on Working Capital Loans as the ‘major obstacle to the business and private sector growth’. However, businesspersons have not been able to put up a strong case in the favor of their argument that the guidelines created disruption in business activities. Meanwhile, NRB officials have been defending the implementation of the guidelines. On Dec 1, NRB governor Maha Prasad Adhikari said businesses diverting short-term working capital loans to long-term investments could pose risks to the financial institutions. “We are open to discussing revising the guidelines as constitutions are also amenable. But we have to choose the right option,” he said.