The construction industry's business owners now have an additional five months to repay their bank debts.
Nepal Rastra Bank gave banks instructions on Wednesday to extend the deadline for paying the principal and interest amount owed by June 2081 to construction companies facing difficulties due to the circumstances, until December 2081, in order to carry out the monetary policy of the current fiscal year. Nonetheless, the National Bank has put plans in place to capitalize the interest that will be raised in this manner and to waive any penalties or fines. The instructions do state, however, that penalty interest on the portion of the loan that exceeds the full loan amount may be assessed in accordance with the specified terms if the interest is not paid during the exemption period.
Monetary policy concessions were announced in order to provide businessmen with respite following the downturn in the building industry and the slowdown in economic activity. According to forecasts made by the National Statistical Office, the construction industry's growth rate for the most recent fiscal year will be negative by 2.07%.
Business owners in the construction industry have also been impacted by the government's tardy payments. Over 40 billion rupees are still owed to business owners from finished projects. As a result, bankers and businesspeople claim that the construction industry as a whole has relaxed.
In a similar vein, the National Bank has also relaxed its policy for adding building industry experts to the blacklist. The National Bank has been instructed, only due to check dishonor, not to place building industry firms on a blacklist until December 2081.
The monetary policy stipulates that good loans only receive 1.10 percent loan loss, and that bad loans will only be upgraded to the good category after six months of micromonitoring if they continue to be consistent. Before, there was a clause stating that the loan could only be changed to a good category after six months.
The National Bank also extended by a year the deadline for implementing the working capital loan guidelines in accordance with the monetary policy announcement. According to the standards, banks must now decide the maximum amount for working capital loans only until June 2082.
Provision for the blacklisting of specific funds with flexibility
In a similar vein, Rashtra Bank has relaxed its policies on the blacklisting of niche investment funds like venture capital and private equity. It is now mandated that small and medium-sized businesses that have received 50 percent or less of their share investment from domestic venture capital and private equity firms not be placed on a blacklist just for being on one.
In order to promote specialist investment, such enterprises have been exempted from the blacklisting restrictions, according to Guru Paudel, Executive Director of Rashtra Bank. The 'Specialized Investment Fund Regulations, 2075' stipulate that the Nepal Securities Board has the authority to approve the operations of venture capital and private equity funds. Over a dozen businesses have applied and been granted permission to run the fund thus far. Specialized investment institutions will be encouraged as a result of this agreement, according to Analraj Bhattarai, CEO of NRN Fund. He claimed that blacklisting a company based only on its name would be problematic because venture finance and private equity invest in multiple businesses.
