Kathmandu. KATHMANDU: Nepal Rastra Bank (NRB) has taken action against more than a dozen microfinance companies for violating regulatory provisions.
Current fiscal year 2082. These microfinance institutions have been taken to action for not complying with the rules till the end of the second quarter of 83 B.S. Under the directives issued by the Rastra Bank, action has been taken by analyzing the status of various financial institutions regarding the compliance of the directives of capital fund, financial resource mobilization, mandatory reserves, loan classification and loss arrangements, loan limit per customer, interest rate provisions, investment arrangements, etc.
What action is taken against whom?
Capital fund ratio: TAG_CLOSE_span_39 As per the directive of the Nepal Rastra Bank, microfinance institutions should maintain 4 percent primary capital and 8 percent capital fund of the total risk-weighted assets. Based on the unrefined financial statements of Poush 2082, the capital fund of Sanjivani (Super) Laghubitta is less than 8 percent. Sanjivani (Super) Laghubitta has been declared problematic as per Bylaw 3 (d) of the Bylaw Related to Prompt Corrective Action, 2074 BS and is currently in the process of being released.
According to the NRB, action has been taken against NADEP Laghubitta and Abhiyan Laghubitta as per Regulation 3 (a) of the same by-laws, while letters have been sent to Forward Microfinance, Community Microfinance, Unique Laghubitta and Mathrubhumi Laghubitta regarding capital fund. The other 45 microfinance companies seem to have complied with the directive on capital funds.
Financial Resource Collection: The existing provision allows the collection of financial resources up to 30 times of the primary capital maintained in the previous quarter. All the microfinance institutions seem to have complied with this directive by mid-January 2082.
Active Credit Loss Provision: As per the directive of the Rastra Bank, the microfinance institutions have maintained a 1 percent loss provision for good loans, 5 percent for micro-monitoring and restructuring÷rescheduling loans and 25 percent in the case of insured loans. Also, for active loans, the loan loss provision is 1.46 percent of the total loan amount.
Passive Credit Loss Provision: As per the directive of the Rastra Bank, the microfinance institutions have maintained the provision of 25, 50 and 100 percent respectively by categorizing the non-performing loans into weak, doubtful and bad loans and 25 percent of the above provision in the case of insured loans.
As of mid-January 2008, the non-performing loan ratio of microfinance institutions stood at 9.99 percent. Also, for non-performing loans, the loan loss provision of 5.17 percent of the total loan amount is maintained.
By mid-January 2082, the microfinance institutions had raised Rs. The government has maintained a loan loss of Rs 33.40 billion. This amount is 6.63 percent of the total outstanding loans and 66.38 percent of the non-performing loans.
Mortgaged Loan to Total Loan Ratio: TAG_CLOSE_span_35 Microfinance institutions can provide micro-enterprise loans by taking collateral not exceeding one-third of the total loans provided by them. Mortgage loans stood at 14.82 per cent of the total loans (retail loan providers) in mid-January of the current fiscal year.
Ratio of Total Loans in Agriculture Sector Microfinance Institutions are required to compulsorily disburse one-third of their total loans to the agriculture sector. All microfinance institutions seem to have followed this provision.
Mandatory Stock Ratio: Microfinance institutions are required to maintain a mandatory reserve ratio of 0.5 percent of the total savings and credit fund (2 percent in case of collecting deposits from the general public).
Microfinance institutions that do not collect deposits from the general public are required to maintain a liquidity ratio of 2.5 percent of their total savings liabilities and microfinance institutions that collect deposits from the general public should maintain a liquidity ratio of 4 percent of their total savings and deposit liabilities.TAG_CLOSE_span_32 TAG_OPEN_span_32 As of mid-January 2082, all microfinance companies seem to have complied with this provision.
Deposit and Savings Interest Rate: The minimum interest rate of deposits and savings should be fixed at least 50 percent of the maximum interest rate of the loan issued by the microfinance institution. All institutions except Kalika Laghubitta, NADEP Laghubitta and Aatmanirbhar Laghubitta have followed this provision. According to the NRB, necessary action has been forwarded by sending letters to those microfinances not abiding by the directive to fully comply with the provision.
Details to be sent: By mid-January 2082, all microfinance institutions are sending the necessary documents and financial statements. In addition, Abhiyan Laghubitta, Nerude Mirmire Laghubitta and Sanjivani Laghubitta (Super) Laghubitta have not sent any data so far in the Supervisory Information System operated by the Rastra Bank, while Srijanshil Laghubitta and Unnati Sahakar Laghubitta are sending a small number of data. According to the NRB, necessary communication has been issued to the microfinance institutions that have not yet submitted any data to the supervisory information system on a regular basis.
