BANKING MANAGEMENT

ASSIGNMENT - 2

Submitted by:

Anjali Paneru (177070)

Registration no: 021958-17

BBA (Emphasis), Year IV, Semester II

Kathmandu University School of Management (KUSOM)

Pichhe Tole, Gwarko, Kathmandu

Submitted To:

Mr. Arpan Paudel

Faculty of Banking Management

March 24, 2021

Q. List out the major policies/provisions developed to cope with the adversity of COVID-19

in Nepalese Banking Sector.

The COVID-19 has created an unprecedented challenge in the goal of attaining higher

sustainable growth and maintaining social justice in order to realize the national aspiration of

"Prosperous Nepal, Happy Nepali". Considering this pandemic, various policies/provisions have

been developed to cope with the adversity of COVID-19 in Nepalese Banking Sector In

accordance with the relief declared by the Nepalese government on March 29, 2020, Nepal

Rastra Bank released a notice.

The following are the major policies/provisions introduced by the Central Bank, considering

impact of COVID-19, based on the Unified Directive 2077:

1. The mandatory cash reserve ratio was lowered from 4% to 3%, the bank rate was reduced

from 6% to 5%, and the repo rate was reduced from 4.5 % to 3.5 %.

2. Provision for specified sectors of BFIs, including Class ‘D' financial institutions dealing

in bulk loans, to reduce interest rates on loans by 2% in the fourth quarter of FY 2076/77

compared to the third quarter of FY 2076/77. For ‘D' class institutions, the interest rate

was reduced by 3%.

3. Monthly or quarterly installment on Loan payments and interest for the months of Chaitra

2076, Baisakh, and Jestha 2077 postponed until the end of Ashad 2077.

4. Borrowers get a 10% interest discount if they pay their monthly or quarterly installments

on time during Chaitra 2076.

5. Provision of extension of tenure, for all types of short term loans extended for working

capital nature to be repaid during Chaitra 2076, by further 60 days.

6. E-banking, mobile banking, wallets, and other electronic payment methods had their

limits raised. During the lockdown period, charges for electronic payments made through

RTGS were also waived.

7. Loans provided to private health service provider institutions for the expansion of their

services to make them capable of treating COVID-19 patients categorized as priority

sector lending.

8. After evaluating the business, a bank can provide a 20% additional loan (on current

capital) to a business in a highly affected sector. A bank can provide more than a 20%

additional loan based on the evaluation result of the overall business proposal and future

business possibilities.

9. Provisions shall be made to restructure and reschedule debts, extend repayment of loans

extended to tourism, education, health, communication, entertainment and all loans for

profession, industries and businesses keeping in view of the difficulties faced due to

COVID-19

10. Arrangements to coordinate with the relevant authority to restructure loans using Private

Equity, Venture Capital, Debt Equity Conversion, and Special Purpose Vehicles if

existing BFI loans cannot be restructured or rescheduled.

11. One time moratorium period can be provided for projects which could not be completed

during grace period due to COVID-19: maximum 2 years for tourism and hotels, 1 year

for highly affected areas, 9 months for moderately affected areas and 6 months for the

less affected areas.

12. The loan installments which could not be repaid up to Ashad 2077 in case of MFIs could

be extended by a maximum period of 6 months by evaluating its necessity and business

continuity.

13. As long as the impact of COVID- 19 remains, charge on use of the ATM of another bank

will be waived off. Further, penalty, charges & fees will be waived off for extension of

payment period for payment of interest or principal amount of loan impacted due to

COVID-19