Nepal Rastra Bank (NRB) has revised its loan classification rules, allowing non-performing loans to be reclassified as “good” just three months after borrowers fully repay both principal and interest. Previously, borrowers were required to remain on a six-month watch list before their credit status could be improved. The revised provision is intended to ease pressure on borrowers while helping banks clean up their balance sheets. Under the new directive, NRB has also allowed microfinance institutions to mobilize up to 50 percent of their Customer Protection Fund to assist families of borrowers affected by natural disasters or accidental incidents. These policy changes are expected to improve credit circulation and support the recovery of distressed businesses.
