According to the new digital lending guidelines from the Central Bank of Nepal, banks in Nepal can now lend up to Rs. 5,00,000 to people who apply for loans online.
Nepal Rastra Bank, the central bank of Nepal, issued the new Digital Lending Guidelines 2078 on February 11, 2022.
As per the guidelines, people who have salary or business accounts in BFIs can apply for loans up to Rs. 5,00,000. For other account holders, the central bank has set a limit of Rs. 2,00,000 for digital lending.
The loan can be repaid in installments over a period of up to three years. Banks and financial institutions (BFIs) can also partner with e-wallets, such as eSewa, Khalti and IME Pay, to act as agents to facilitate loan applications and repayment.
Digital transactions in Nepal
The number and volume of online transactions are growing rapidly in Nepal. The development and expansion of digital transaction infrastructure such as real-time gross settlement (RTGS), interbank funds transfer, payment card, mobile wallet and internet banking have all contributed significantly. significant to the growth of online transactions.
The digital loan will help streamline the loan application process by eliminating the need for customers to physically go to the bank. It will also help CIBs save time and money.
However, this is not the first time we hear about digital loans in Nepal. In March last year, F1 Soft, a Nepalese fintech, launched Foneloan, which provided instant loans digitally and without the need for collateral or paperwork.
However, the resettlement period for the loan through the service was only 30 days. Similarly, in December 2021, Kumari Bank had also introduced the Buy Now, Pay Later (BNPL) service. It allowed customers to get a loan from their mobile banking app on EMI for up to 12 months.
Both services had a maximum lending capacity of Rs. 2,00,000, required the respective bank’s mobile banking app and relied on analytics software. They are different from personal loans.
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Digital Lending Guidelines
According to the guidelines, banks and financial institutions must maintain a separate portal for loan applications, from which customers can digitally submit required documents.
Additionally, CIBs can accept loan applications through their mobile banking apps. Loan seekers should then be notified digitally if their loans are approved.
The guidelines state that banks and financial institutions must store customer data and financial information securely. Data is not to be used or disseminated for any purpose other than loan processing.
If the customer fails to repay the loan, CIBs must notify Nepal’s Credit Information Bureau to blacklist the customer, the central bank said. The central bank also requires CIBs to submit digital loan details to them every three months.
Payment service providers as agent
As mentioned earlier, according to the guidelines, banks and financial institutions can enter into agreements with payment service providers to act as digital lending agents.
The central bank said payment service providers should clearly inform customers of which banks or financial institutions they are about to borrow money from.
Payment service providers should also develop a system to automate the processing of loan applications and the collection of principal and interest.
The central bank says CIBs can only charge customers service fees and third-party fees, and the fees must be clearly disclosed to customers.
If payment service providers act as official agents of the bank or financial institution, the guidelines state that service providers should not collect service fees directly from customers; it is rather the BFI which should manage them.
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