Nepal Rastra Bank (NRB) has released a set of guidelines to facilitate digital lending to customers. Exercising the rights granted by the Nepal Rastra Bank Act 2058, section 110, sub-section 03, including the Act’s second amendment 2073, the federal bank has released guidelines regarding electronic lending.
Digital lending will help people take a small-scale loan online through mobile banking apps/digital wallets without visiting the bank. This is a novel practice that will provide loan services for people at their convenience.
NRB says the objective of the guidelines is to encourage optimum use of technology and make digital lending simple, and convenient for the customers. The bank expects digital lending will lower the costs of the service, make it more transparent, and also grow cashless practices amidst COVID-19. The service aims to engage customers in digital lending, fulfill customers’ increasing loan demands, grow loan access among the customers among others.
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As per the guidelines, licensed banks and financial institutions (B/FIs) will have permission to offer the service. NRB says B/FIs can also establish cooperation with payment service providers (as agents) to facilitate loan applications and payments.
Digital Lending Threshold – up to 5 Lakh Till 3 years
NRB has also drawn a threshold on loan amount and period. For bank customers on salary accounts or salaried, and businesses owners, they can apply for loans up to 5 lakh and others could receive up to 2 lakh in loans. The loan period will run up to 3 years. The loanee can pay in one full sum or in installments to the loaner (B/FIs)
Process For Digital Loan, And Other Details
- Licensed banks and financial institutions need to start a dedicated portal to receive digital loan applications. They can also use mobile applications for the service.
- After obtaining the application, they must gather further detail of the applicant electronically.
- The B/FIs must determine whether a loan applicant is eligible for it by the finances or not. Only after ensuring, they may extend the loan.
- After the loan amount is processed, the applicant must be informed.
- The B/FIs must store all the details electronically.
- The institutions must also disseminate information relating to its responsibility & accountability, customer protection, complaints regarding loan, etc.
Regarding the service charges, the central bank has dictated the loaner must inform its customers regarding services charges, and other payments. Customers can’t be charged beyond service charges and third-party charges. The guidelines also dictate that if a PSP is involved in a digital loan, the B/FIs must bear the service charges and not the loanee.
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The digital transaction is booming and now digital lending could also see a momentous rise with NRB releasing its guidelines. How do you like the prospect of getting a loan all electronically? Do share your feedback in the comments below.