Business firms can now get loans of up to Rs 5 million from banks without submitting a tax clearance certificate. Likewise, the first-time-home buyers are also allowed to get loans even without having the tax clearance certificate.
The Nepal Rastra Bank adopted this flexible policy by revising its unified directives. As per the circular issued by the central bank on Thursday, firms can obtain loans within the prescribed limit based on their tax filing documents.
Similarly, the central bank has turned flexible on the requirement for tax clearance certificates for loans of Rs 5 million-Rs 20 million to be taken by the businesses related to agriculture, tourism and small and medium enterprises.
Gunakar Bhatta, spokesperson for the NRB, said the central bank has enforced the policy to facilitate such firms to generate the needed funds without any delay. “Earlier, these borrowers needed to produce tax clearance certificates to get the bank loans, which usually took a longer time for the entire process,” Bhatta said.
NRB through revising the Monetary Policy for 2019/20 last week talks on revising the measures while issuing loan.
NRB has also revised the duration for the watch list of the firms that reel under financial problems. As per the directive, the loan provided to the firms in priority sectors will be defined under watch list only if the firms undergo poor financial health for successive three years. “For the projects under construction, the watch list will be maintained only after two years of the beginning of the production, based on the financial health,” reads the directive.
Since 2016, the central bank has been maintaining the watch list of loans as a part of non-performing loans. NRB introduced “watch list” under the loan provision to discourage the growing practice of borrowers not utilizing the loans in projects where they were supposed to go. As per the provision, the banks and financial institutions need to categorize the loans provided to a firm whose net worth and cash flow have remained negative for the past two years despite regular payment of principal and interest, under the “watch list.”
Additionally, the central bank has also permitted the banks to provide loans to the first-time-home buyers without submitting the tax clearance certificates. The upper limit of debt service to gross income ratio (DTI) for the first time purchaser of residential homes has been fixed at 60 percent from the previous 50 percent.
The NRB has redefined the loan to value (LTV) ratio limit for the licensed realty business. According to the revised policy, the limit for the home loan for the housing business in metropolitan, sub-metropolitan and municipalities adjoining Kathmandu Metropolis has been raised to 50 percent from 40 percent. Similarly, the limit of such loans in locations other than the aforementioned areas has been raised to 60 percent from 50 percent.