Wednesday, August 22, 2012

Banks can work as depository participants

The central bank has let the banks work as depository participants maintains a dematerialised account for investors who hold their securities in an electronic format in Central Depository System.
Similarly, issuing a circular, Nepal Rastra Bank (NRB) said today that financial institutions need not provision 20 per cent extra on loans with third party collateral for the current fiscal year.
In the Unified Directives for the current fiscal year, NRB had made 20 per cent extra provisioning for such loans with third party collateral mandatory, which was opposed by banks and mostly by construction companies.
"This provision was meant to discourage the practice of pledging collateral of anyone to get loans which has landed a large number of people in trouble, but since people were confused, NRB felt the need to revise it," said spokesperson for NRB Bhaskar Mani Gyanwali.
Likewise, NRB has also tweaked the regulation regarding 100 per cent provisioning of the loans forwarded for the repayment of Trust Receipt (TR) loans which was highly opposed by the banks and importers.
According to the new provision, banks need not provision 100 per cent for the loans that are meant to repay for TR loans if the borrowers get such loans accepted beforehand while getting letter of credit (LC) issued for the imports.
"TR loans are usually provided for imports through LC, but if the situation does not allow the borrower to repay the loan within 120 days then they can take loans before getting a LC to pay for the imports," pointed out Gyanwali.

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