Micro-Finance Policies in Nepal

Nepal Rastra Bank Act, 2002 has empowered the NRB to inspect and supervise all financial institutions including Rural Micro-Financial Institutions and issue directives. So, NRB has played a key role in policy formation and execution to the financial institutions. The major policies issued for the Micro-Financial institutions are as follows: 

1. Commercial banks are required to extend 12 percent of their outstanding loans and advances as priority sector credit, of which 0.25 to 3.00 percent should be extended to deprived sector.  
2. The central bank provides refinance facilities to commercial banks against the credit documents of   the priority sector credit. 
3. In order to open an urban branch, commercial banks need to open one branch in semi-urban and one in rural area compulsory.  
4. Micro credit is normally based on group guarantee and it is actually collateralless lending. 
5. Financial Intermediary Act, 1998 has been enacted to enhance the Financial Intermediaries ( FINGOs) for wholesale lending
6.  "Poverty Alleviation Fund " has been created for the growth of rural financial markets. The fund will be utilized for conducting training programs and extending micro-financing services. 
7. Rural Micro-Finance Development Centre (RMDC) Ltd. has been established for wholesale lending to Micro Financial Institutions to enhance rural micro-credit.  
8. Single borrower limit of micro credit (deprived sector) has been fixed up to Rs.30, 000.
9. Commercial bank can also provide credit to the ADB/N, RDBs, SACCOs, and FINGOs as priority sector credit.  
10. Nepal Rastra Bank is carrying out the " Restructuring Programme "in Grameen Bikash Banks due to the heavy losses.
11. Priority Sector Credit Programme extended by the commercial banks will be phasedout within next five years but deprived sector landing will remain valid.