Kathmandu: The Nepal Rastra Bank has introduced stricter guidelines for banks and financial institutions regarding the acquisition of borrower collateral as their own property.
Through a recent circular, the central bank has mandated that banks can only take ownership of the collateral themselves if it remains unsold after at least three auction attempts.
Previously, banks were required to absorb the collateral as non-banking assets after just two failed auctions. The new rule requires completing the auction process a minimum of three times before the bank can claim ownership if the property still fails to sell.
In a related development, the central bank has removed the previous requirement for banks to set aside 100 percent provisions once they record such non-banking assets on their books.
These changes are expected to discourage banks from hastily taking over unsold collateral at their discretion, while also easing the financial burden of loss provisions if they do end up acquiring such assets.
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