KATHMANDU — The Nepal Rastra Bank (NRB) has reiterated that it is mandatory for all banks and financial institutions (BFIs) to verify a borrower’s credit history before approving any loan. As part of its latest financial literacy campaign, the central bank emphasized that evaluating a borrower’s financial standing through the Credit Information Bureau (CIB) is a standard and required procedure.
Key Highlights of the Regulatory Requirement:
- Comprehensive Assessment: Before granting new loans, restructuring existing ones, or performing periodic reviews, BFIs must access a borrower’s data from the CIB.
- Data Included: The credit reports retrieved contain vital information, including:
- Current credit limits and outstanding loan balances.
- Repayment history and records of overdue installments.
- Details of collateral pledged against loans.
- Status of guarantors associated with the borrower.
- Blacklist Status: Verification of whether the borrower or the involved parties are currently on the CIB blacklist.
- Purpose: The initiative, titled “Correct Information, Secure Lending,” aims to promote responsible lending practices and ensure that both banks and borrowers remain fully aware of their financial obligations.
Why This Matters:
The central bank’s directive is designed to maintain financial stability and mitigate risks within the banking sector. By mandating these checks, the NRB ensures that lenders have a transparent view of a borrower’s overall debt burden, preventing the accumulation of “bad loans” and protecting the integrity of the financial system.
The Nepal Rastra Bank urges both financial institutions to uphold high standards of due diligence and encourages the public to remain vigilant about their own credit records to ensure smooth access to future financial services.
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