Nepal Rastra Bank (NRB) has adopted a more flexible approach to direct sector lending by granting banks and financial institutions an additional year to meet mandatory credit flow targets for specific priority sectors.

Through an amendment to its Unified Directives for Banks and Financial Institutions, the central bank extended the deadline to meet minimum lending requirements in agriculture and small and medium enterprises (SMEs). Previously, commercial banks were required to meet these sectoral lending thresholds by mid-July 2027. With the revision, banks now have until mid-July 2028 to comply.

Under the new provision, commercial banks must gradually increase credit exposure in agriculture and SMEs to reach 15 percent of their total loan portfolio by mid-2028. The phased targets require banks to achieve 11 percent by mid-July 2025, 12 percent by mid-July 2026, 13 percent by mid-July 2027 and 15 percent by mid-July 2085. Previously, banks were expected to achieve 12 percent by this fiscal year, 13 percent by mid-2026 and 15 percent by mid- 2027.
Similarly, development banks are now required to channel at least 20 percent of their total loans into agriculture, cottage, small-scale industries, energy, and tourism by the extended deadline of mid-July 2028. Likewise, Class ‘C’ finance companies must disburse at least 15 percent of their total loans to these sectors by mid-July 2028.

NRB has also introduced flexibility for commercial banks that have already met the minimum lending requirement in the agriculture sector but are struggling to meet quotas in other areas. These banks are now allowed to allocate the shortfall to their area of expertise, provided the total lending across all targeted sectors meets the required percentage.

In addition, the central bank has allowed restructuring and rescheduling of loans up to Rs. 20m disbursed in agriculture, energy, and SMEs, if the borrower faces financial difficulties. The provision allows a one-time rescheduling based on the borrower’s request and a detailed assessment of the business plan and cash flow, provided at least 10 percent of the due interest has been recovered.

However, NRB has imposed strict conditions on such restructuring. As per the new provision, restructuring must be completed by mid-September, the restructured loan must retain at least the same risk classification as of mid-December last year and previously made loss provisions cannot be reversed during restructuring.