Central Bank directed BFIs to check Multiple Banking

Central Bank of Nepal has directed Banks and Financial Institutions to check multiple banking under the heading of Overdraft, Working Capital, Cash Credit, Demand, Trust Receipt, Short-Term and Hypothecation loan. From now onwards BFIs has to declare loan exposures mandatorily before sanctioning fresh loan or renewing the existing credit line. The central bank further instructs BFIs to make a provision of verifying the borrower’s declaration with the report maintained at CIB to ensure actual loan exposures before sanctioning any credit line.

The latest directive has come into effect amid an increasing malpractice of using multiple banking as a window dressing strategy to avoid possible provision against bad loan in order to escape borrowers from possible blacklisting. This directive is believed to be instrumental in discouraging multiple banking and maintain a prudent banking practices way forward.