Nepal Central Bank Allows Interest Capitalization for Long-Term Projects
Summary
Nepal Rastra Bank has amended its directive to allow interest capitalization for loans in all long-term projects taking at least two years to start commercial operation, easing financial pressure on investors until projects begin generating income.
Key Points
- Nepal Rastra Bank has permitted capitalization of interest on loans for all long-term projects taking at least 2 years to start commercial operations.
- Previously, borrowers had to pay interest after the grace period ended, even if the project was not producing income.
- Banks are required to create procedures to prevent misuse of interest capitalization, with board approval necessary.
- Special provisions are in place for hydropower projects delayed due to transmission line issues and for projects affected by natural disasters, with adjusted loan loss provisioning requirements.
