Nepal Rastra Bank Facilitates Interest Payment Relief for Construction Entrepreneurs

Nepal Rastra Bank (NRB) has introduced a new provision to ease the burden of interest payments for construction entrepreneurs. Issuing a unified directive to banks and financial institutions on Wednesday, the central bank has allowed the restructuring or rescheduling of loans related to the construction sector after the repayment of at least 10 percent of the outstanding interest.

This initiative, led by the recently appointed Acting Governor Dr. Neelam Dhungana Timsina, has brought significant relief to both the banking sector and construction entrepreneurs. The NRB’s directive states, “For loans extended to construction entrepreneurs where the source of funds is assured by a public entity, and the project has either been completed or is ongoing but payment is still pending, banks may restructure or reschedule the loan based on a cash flow analysis and the necessity and justification, provided at least 10 percent of the due interest is recovered upon the borrower’s request.”

However, certain conditions have been outlined for this facility. The restructuring or rescheduling must be completed by the end of Asar 2082 (mid-July 2025). Additionally, loans restructured or rescheduled must be classified in at least the same category they were in as of Mangsir 2081 (mid-December 2024), and no penal interest can be charged for that period.

Banks are required to maintain a 5 percent loan loss provision for loans that are restructured or rescheduled. However, any prior loan loss provisions cannot be written back. Furthermore, construction entrepreneurs must submit documentation to banks proving that payments from the relevant public entity are still pending.

This measure is expected to provide relief to construction entrepreneurs who have been facing challenges due to delayed government payments and the economic fallout from the COVID-19 pandemic.