Kathmandu: The digital payment service providers(PSPs) are mulling to offer life insurance policy loans through the digital wallet platform. Based on the provision in the Loan Facility Guideline 2078 issued by the Nepal Rastra Bank(NRB), financial institutions can disburse loan up to Rs. 500,000 on the basis of the application received through electronic medium, the PSPs have started consultations with the life insurers to execute the loan facilities for policy holders.
A positive role of The Insurance Board, regulatory authority of insurance industry, is expected to facilitate the insurance policy loan on digital platform. As per the existing rule, the Life Insurers can issue policy loan only against the collateral of original policy document.
As per the directives of the NRB, users of digital wallets or mobile banking services including e-service, Connect IPS, Khalti, IME Pay, Prabhu Pay or users of mobile banking services will be able to apply for loans up to Rs. 500,000 through mobile apps without going to a bank or financial institution. Thus, the loan amount will be credited to the account of the concerned customer shortly after registering for the loan.
Obligation to go to the insurer’s office carrying the original insurance policy document in order to get the loan will also be no more mandatory. Digital wallet service providers say that it is possible to disburse a certain amount of credit through digital wallet based on the credit score of the customers who have updated their KYC details in the digital wallet, has been doing regular transactions and has not recorded any suspicious financial transactions.
Once an insured gets a policy loan, the details of the loan issue will be immediately updated in the core software of the insurer. The company will take necessary decision after looking at the details of the old loans when the insured who has taken the loan once again applies for the loan or any other claims.
There is a provision that the life insurance policy will be automatically confiscated if the insured concerned pays the premium or does not pay the principal or interest of the loan for a long time even after taking the loan against the insurance policy.
As per the unaudited financial statement made public by the Life Insurance Companies, policy loan has reached Rs. 57.69 billion till Magh end of FY 2078/79. In the corresponding period of the previous fiscal year, life insurance companies had disbursed Rs. 47.12 billion for such loans.
According to the NRB, employees with a savings account will be able to get a loan of up to Rs. 500,000 through a bank or digital wallet providing financial services through electronic means. Elsewhere, customers will be able to get loans up to a maximum of Rs 200,000.
According to the Nepal Rastra Bank, the number of customers and transactions doing financial transactions through electronic means has been steadily increasing since the Lock-down started last year. As of Ashoj end of the current FY, the turnover through mobile banking was Rs. 94.40 billion. While the turnover through digital wallet was Rs. 16.27 billion, the turnover through QR code was Rs. 6.52 billion.
Similarly, Rs 4.39 billion has been transacted through Point of Sales (POS). However, the payment for online purchases through the card has dropped from Rs. 843 million to Rs. 349 million.