Firms Seeking Loans of up to Rs 5 million do not need to submit tax certificate

Business firms can now get loans of up to Rs 5 million from banks without submitting a tax clearance certificate. The Nepal Rastra Bank (the “NRB”) adopted this flexible policy by revising its unified directives. As per the circular issued by the NRB, firms can obtain loans within the prescribed limit based on their tax filing documents. Similarly, the NRB turned flexible on the requirement for tax clearance certificates for loans of Rs 5 million- Rs 20 million to be taken by the business related to agriculture, tourism and small and medium enterprises. Earlier the borrowers need to produce tax clearance certificates to get the bank loans, which usually takes a long process.

Additionally, the NRB has also permitted the banks to provide loans to the first-time-home buyers without submitting the tax clearance certificates.

NRB has also revised the duration for the watch list of the firms that reel under financial problems. As per the directive, the loan provided to the firms in priority sectors will be defined under watch list only if the firms undergo poor financial health for successive three years. As per the directive the watch list will be maintained only after two years of the beginning of the production, based on the financial health for the projects under construction. Since 2016, the NRB has been maintaining the watch list of loans as a part of non-performing loans. NRB introduced “watch list” under the loan provision to discourage the growing practice of borrowers not utilizing the loans in projects where they were supposed to go.

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