Logo of Phnom Penh Post newspaper Phnom Penh Post - A digital leap: Nepalis can borrow over $4,000 online

A digital leap: Nepalis can borrow over $4,000 online

Content image - Phnom Penh Post
Digital payments in Nepal during the period from mid-December to mid-January, the sixth month of the current fiscal year, amounted to 5.14 trillion rupees ($42.6 billion) with 54.56 million digital transactions. RAWPIXEL

A digital leap: Nepalis can borrow over $4,000 online

Nepalis can now borrow up to 500,000 rupees ($4,140) from their banks over the internet, and save themselves a trip to the banking office.

On February 11, Nepal Rastra Bank issued the Digital Lending Guidelines 2022 allowing customers to obtain loans of up to 500,000 rupees from the digital platforms of their banks or from e-wallet from the comfort of their homes or anywhere else.

The policy will facilitate small lending for micro, cottage and small scale enterprises, personal loans and education loans, officials said.

According to the central bank, employees holding salary accounts and professional and entrepreneurial account holders can get loans of up to 500,000 rupees. For other account holders, the maximum limit has been set at 200,000 rupees.

The payback period for both categories of loans is three years, and repayment can be made on instalment basis.

Guru Prasad Poudel, executive director of the central bank, said the move was aimed at making the digital payment ecosystem inclusive. “It is also preparation towards a cashless society,” he said.

“The applicant should submit the required paperwork digitally,” Poudel said. “Small borrowers for micro, cottage and small scale enterprises, and people seeking personal or education loans can benefit from this scheme.”

While receiving loan applications from customers, banks and financial institutions need to create a separate portal for digital credit flow, as per the guidelines.

Banks can receive loan applications through their mobile app. After the loan is approved, the customer will be informed through a digital medium.

“Banks will track the creditworthiness of the applicants besides observing their other online transactions before issuing the loan,” Poudel said.

According to the central bank’s guidelines, customers have to be clearly informed early on about the extra charges involved when taking loans digitally. Banks are permitted to collect only loan service charge and third party charges from their borrowers.

If payment service providers are the official representatives of the digital loan process, banks and financial institutions should not charge customers.

Licensed payment service providers using the technology will ease lending by creating contact between potential customers and banks and financial institutions.

The guideline says that in case a borrower does not repay the loan, the interest on the loan and the penal interest within the time limit, the bank or financial institution should write to the Credit Information Bureau to blacklist such borrowers according to the prevailing laws.

Banks and financial institutions also need to submit details of the digital loans issued every three months to the central bank.

Customer details and financial information should not be used or distributed for other purposes without the customer’s approval, and the information needs to be stored safely and securely, the guideline said.

Amit Agrawal, co-founder and director of Khalti, a digital wallet system, hailed the central bank’s move.

“We have created e-wallet services not only for payment but also for digital financial services. Digital finance services mean access to financial services as well as to capital,” Agrawal said.

Transactions through digital payment systems have swelled tremendously in recent years, and the development and expansion of digital payment related infrastructure like real time gross settlement (RTGS), interbank fund transfer, payment card, mobile wallet, mobile banking and internet banking has played a significant role in the spread of online transactions.

Digital payments during the period from mid-December to mid-January, the sixth month of the current fiscal year, amounted to 5.14 trillion rupees with 54.56 million digital transactions. In the previous month, there were 49.45 million transactions worth 4.84 trillion rupees.

Poudel said that since the month-long period from mid-December to mid-January marks the end of the second quarter, the volume of payments usually increases. This time, it increased through digital means.

“The rise in transactions also shows that more people are making most of their transactions online,” he said.

A breakdown by online payment platforms shows that 3.68 trillion rupees worth of transactions were made through RTGS from mid-December to mid-January.

The figure represents a sharp increase from the 1.68 trillion rupees recorded in the same period of the last fiscal year.

Transactions through the interbank payment system between mid-December and mid-January totalled 167.79 billion rupees, down from 242.53 billion during the same period in the previous year.

According to the central bank, ConnectIPS payments during the review period rose to 247.47 billion rupees from 100.77 billion in the same period in the last fiscal year.

Internet banking also swelled to 13.49 billion rupees in the review period from 8.50 billion previously.

Transactions through mobile banking increased to 94.40 billion rupees from 33.15 billion, and wallet transactions swelled to 16.27 billion rupees from 9.65 billion.

As per the central bank, quick response (QR) code-based payments during the period mid-December to mid-January rose to 6.52 billion rupees from 1.24 billion.

Electronic transfer of funds at point of sale (retail transactions) also increased to 4.39 billion rupees in the review period from three billion previously.

E-commerce transactions using cards went down to 349 million rupees during the review period from 843 million in the same period in the last fiscal year.

Payment service providers say they plan to introduce the lending system soon.

“It will take a few months for us to introduce the lending services from our platforms as we need to build a system and collaborate with banks. We have to prepare a separate team to provide the service,” said Agrawal.

“This is one of the biggest achievements in itself and a milestone in the country’s digitalisation endeavours.”

THE KATHMANDU POST/ASIA NEWS NETWORK

MOST VIEWED

  • ‘Education’ a priority traffic-law penalty

    A top National Police official on June 21 neither rejected nor confirmed the authenticity of a leaked audio message, which has gone viral on social media, on a waiver of fines for a number of road traffic-related offences. General Him Yan, deputy National Police chief in

  • Pursat Ford assembly plant opens

    The Kingdom’s first Ford assembly plant was inaugurated on June 16 in Pursat province amid rising demand for brand-new vehicles among Cambodians. The facility is seen as a game changer for the domestic automobile industry, which could bring a wave of investors seeking to cash

  • Siem Reap’s $18M zoo said to educate public, help wildlife

    Angkor Wildlife and Aquarium Co Ltd has invested $18 million in a zoo in Siem Reap province, which will be opened in October to educate and promote animal conservation as well as attract national and international tourists. Currently, the Angkor Wildlife and Aquarium is building the

  • Volunteer scheme to foster ‘virtuous’ humanitarian spirit

    A senior education official said volunteer work contributes to solidarity and promotes a virtuous humanitarian spirit among the youth and communities. Serei Chumneas, undersecretary of state at the Ministry of Education, Youth and Sport, made the comment during the opening of a training programme called “

  • $50B infrastructure plan en route

    The government’s upcoming $50 billion,10-year infrastructure master plan will provide tremendous investment opportunities for domestic and foreign entities, transport experts and economists say. Minister of Public Works and Transport Sun Chanthol revealed the plan to Japanese ambassador to Cambodia Masahiro Mikami on June 15. At

  • Chinese firms unveil preliminary results on metro, monorail for capital

    Minister of Public Works and Transport Sun Chanthol and representatives from China Road and Bridge Corp (CRBC) and its parent company, the state-owned China Communications Construction Co Ltd (CCCC), met on June 24 for talks on results of the firms’ preliminary study on a potential metro