NRB Offers Breathing Space: Three-Month Loan Extension for Flood-Hit Businesses

KATHMANDU — In a move aimed at mitigating the financial fallout from recent natural disasters, the Nepal Rastra Bank (NRB) has granted a critical three-month extension for the settlement of loan installments. Borrowers directly impacted by the devastating floods in the Bhote Koshi and Budhi Gandaki river basins will now have until mid-January (Poush-end) to clear their principal and interest dues, originally scheduled for mid-October (Ashoj-end).

The central bank’s regulatory intervention primarily targets local enterprises, infrastructure projects, and commercial ventures severely battered by the August 26 (Bhadra 10) Bhote Koshi floods in Rasuwa, as well as the recent inundation along the Budhi Gandaki corridor in Gorkha. Significantly, the relief package also encompasses businesses tethered to the Rasuwa customs point. Traders grappling with stalled import-export operations of raw materials, semi-finished, and finished goods due to blocked trade routes will benefit from this deferred payment schedule.

However, the regulatory authority has made it clear that this facility is not a blanket extension. To prevent potential misuse of the relief measure, the deferment will not be applied automatically to everyone in the affected regions. Banks and financial institutions (BFIs) have been instructed to conduct rigorous, case-by-case assessments. BFIs must evaluate the actual disruption to a borrower’s sales, cash flow, inventory levels, and overall financial health. Only those who can demonstrably prove that the floods severely constrained their debt-servicing capacity will qualify for the revised timeline.

This targeted intervention, enacted through an amendment to the unified directives under Section 79 of the Nepal Rastra Bank Act, 2058, reflects the central bank's cautious approach to crisis management. By mandating strict financial assessments rather than offering sweeping, unconditional extensions, the NRB aims to balance empathetic disaster relief with structural financial discipline.

The policy acknowledges the compounding economic shocks faced by businesses in these regions—ranging from direct physical damage to projects, to prolonged supply chain paralysis at northern border points. From a macroeconomic perspective, this is a necessary buffer. By providing this 90-day window, the NRB is proactively trying to prevent a sudden, artificial spike in non-performing loans (NPLs) within the banking sector. It provides the stranded businesses a genuine chance to liquidate their stalled inventories, restore their cash flows, and regain their footing without the immediate, paralyzing threat of default or asset foreclosure.