July 2: Banks and financial institutions will be allowed to restructure the loans given to the construction materials industry as well.

The third quarterly review of the monetary policy states that the loan given to the construction sector can be rescheduled and restructured upon the request of the borrower.

However, there was confusion regarding which industries the construction sector covers.

Further clarifying the directive it issued last month, the Nepal Rastra Bank said the credit extended under the residential loan facility for households, non-residential loans for commercial purpose and big construction projects like highway, bridges as well as all the industries directly related to these sectors such as cement, sand and bricks industries fall under the construction sector.

The banks need to take into account various factors such as the cash flow and income analysis of the construction company and the need and justification for rescheduling the loan. As per the central bank’s provision, the banks can reschedule the loan after analyzing these factors and taking 10 percent interest in advance.

This facility will be available for the borrowers with active loans as of mid-April this year and the rescheduling or restructuring should be completed by mid-July.

The central bank issued the clarification after there was confusion regarding the restructuring of loans for which specific industries the construction sector covers.

Through the third quarter review of the monetary policy, the central bank had announced relief for some sectors, noting that 'some flexibility has been made cautiously'.

According to the announcement of the monetary policy, the central bank has issued instructions to banks and financial institutions to reschedule the loans extended to hotels and restaurants, animal husbandry, construction sector and loans up to Rs 50 million given to all other sectors upon the request of the borrower, after analyzing the cash flow and income of the industry/business and analyzing the need for restructuring the loan.