February 24: Nepal Rastra Bank (NRB) has amended the Unified Directives 2078 to tighten the screws on microfinance companies.

As per the new provision, microfinance companies must keep 100 percent cash reserve if they propose issuing  15 percent dividend.

In the revised directives of NRB, if such companies want to issue more than 15 percent dividend (cash or shares), they must deposit 50 percent of the dividend exceeding 15 percent in the general reserve fund, 35 percent in the customer protection fund and 10 percent in the corporate social responsibility fund. According to this arrangement, when a microfinance company gives more than 15 percent dividend, it has to keep Rs 95 in various reserve funds while issuing dividend of Rs 100.

Earlier, microfinance companies were required to keep 50 percent of the amount w in the general reserve fund and 25 percent in the customer protection fund only in case of issuing  more than 20 percent dividend. No matter how much dividend was distributed, not more than 1 percent of net profit was required to be spent on corporate social responsibility.

Similarly, in the past, the limit of micro enterprise loan which was Rs 1,500,000 with mortgage has now been lowered to Rs 700,000, while borrowers who take loans from commercial banks, development banks and finance companies not allowed to take loans from micro finance companies.

Similarly, NRB also added a provision that orientation of directors should be done within Nepal. Since the location was not mentioned earlier, the directors used to go abroad for orientation.

Employees working in microfinance companies should be given training related to microfinance transactions at least once every 2 years. The details of the training provided by the organization should be published on the website every 6 months.

Similarly, NRB also added a provision that the interest rate of deposits and loans should differ by only 50 percent from now on. Earlier, there was no provision regarding the minimum interest rate on savings.