Nepal Rastra Bank Becomes More Flexible Towards Microfinance Companies

Nepal Rastra Bank (NRB) has adopted a more flexible approach toward microfinance companies. According to a new circular issued on Tuesday, microfinance institutions (MFIs) are now permitted to invest in shares, debentures, and mutual funds. However, such investments cannot be counted towards their primary capital fund.

Additionally, investments made in institutions such as the National Banking Institute, Nepal Clearing House Limited, Credit Information Bureau, and Nepal FinSoft Company will be allowed to be included in the primary capital fund. These entities also have investments from NRB.

The circular imposes restrictions on appointing or reappointing individuals as directors or chief executives if they or their immediate family members own 1% or more of the MFI's paid-up capital.

NRB has facilitated the process for wholesale lending microfinance institutions to merge with or acquire retail-focused microfinance companies. After such integration, the merged entity will be allowed to operate as a retail-focused microfinance institution.

Microfinance companies have been directed to prepare their financial statements in compliance with Nepal Financial Reporting Standards (NFRS). This move aims to enhance financial transparency and align with international standards.