Federation of Nepalese Chamber of Commerce and Industries Requests Extension for Loan Interest Payment Deadline

16th October 2025, Kathmandu

The private sector in Nepal, the bedrock of the country’s economy, is once again knocking on the doors of the central bank, the Nepal Rastra Bank (NRB), seeking vital relief. In a move that highlights the continuing fragility of the operating environment, the Federation of Nepalese Chambers of Commerce and Industry (FNCCI) formally requested an extension for the payment of loan interest.

FNCCI Requests for Extension

The core of the request, submitted on 15 October 2025 (29 Ashwin 2082), points to an amalgamation of disruptive events, from civil unrest and natural disasters to cultural holidays, that have severely hampered the ability of businesses and borrowers to meet their financial obligations in the first quarter of the current fiscal year.

This latest plea, delivered by an FNCCI delegation led by Acting President Anjan Shrestha to NRB’s Acting Governor Dr. Nilam Dhungana Timilsina, underscores a critical need for the central bank to employ its regulatory flexibility and ensure the continued survival of distressed enterprises. The circumstances cited, protests, floods, and the extended Dashain festival period, paint a picture of an economy repeatedly battling unexpected headwinds.

A Triple Threat to Timely Repayments

The FNCCI’s compelling argument for a deadline extension is founded on a ‘triple threat’ scenario that has collectively stalled economic activities and, consequently, cash flow for borrowers:

1. Unrest, Demonstrations, and Vandalism
Across various regions of the country, a surge in protests and demonstrations has brought commercial activities to a standstill. These disruptions are often accompanied by vandalism, which not only causes direct financial loss but also creates a climate of fear and uncertainty. For businesses, especially those involved in manufacturing, trade, and transportation, prolonged shutdowns translate directly into zero revenue generation. Without income, borrowers find it virtually impossible to accumulate the necessary funds to service their debt, making the scheduled interest payment deadline an insurmountable obstacle. The private sector body rightly argues that penalizing borrowers for losses caused by force majeure events, such as widespread civil unrest, is counterproductive to economic stability. The search for a quick resolution to these societal issues is paramount, but in the interim, regulatory relief is essential.

2. Natural Disasters: Floods and Continuous Rainfall
In addition to man-made crises, the country has faced devastating natural calamities. Continuous rainfall and severe floods have wreaked havoc, particularly in the eastern and central regions of Nepal. This has resulted in the destruction of infrastructure, including essential transport routes, and damage to commercial property and agricultural yields. The resultant supply chain disruptions halt the movement of goods and raw materials, crippling industries and trade. For those directly affected, recovery is the immediate priority, and expecting timely loan repayments from businesses struggling to rebuild their physical assets or clear logistical bottlenecks is unrealistic. NRB has historically offered deadline relaxations following such disasters (as seen with previous floods and earthquakes), setting a precedent for a favorable response to this part of the FNCCI’s request.

3. The Dashain Festival Impact
The third factor, while cultural, holds significant economic weight: the extended public holidays due to the Dashain festival. Dashain, the most important festival in Nepal, is celebrated with lengthy holidays, which understandably slow down or completely halt commercial and banking operations. While a time of joy and spending, the extended break means the effective number of working days available for revenue generation and, critically, for facilitating the physical process of loan installment and interest payments is drastically reduced. This period is a perennial challenge for quarterly-end payments, and when compounded by protests and floods, it creates a choke point that prevents timely compliance.

The Implications for Financial Stability and Borrower Relief

The FNCCI’s request is not merely an appeal for leniency; it is a critical measure to prevent a systemic increase in non-performing loans (NPLs) within the banking sector.

A Necessary Shield for Borrowers
Granting the extension provides immediate and much-needed borrower relief. By pushing back the due date for interest payments (Sawa interest), the NRB would effectively prevent thousands of borrowers from being immediately classified as defaulters. This proactive step helps to maintain the credit health of the business community, avoiding the cascade effect where loan defaults lead to business blacklisting, further restricting access to future credit, and ultimately driving companies toward collapse. The private sector advocates for measures that ensure struggling businesses are not unduly punished for circumstances beyond their control, allowing them a temporary financial buffer to recover their operational footing.

Safeguarding the Banking Sector
For the banking and financial institutions (BFIs), the measure acts as a short-term safeguard. Although a deadline extension delays cash flow, it prevents the immediate and sharp increase in loan loss provisioning that a sudden rise in NPLs would necessitate. NRB policies often require BFIs to maintain higher provisions for bad loans, which directly impacts their profitability and capital adequacy. By allowing a grace period, the central bank buys time for the economic environment to stabilize, potentially enabling more businesses to pay off their dues later, thereby reducing the ultimate NPL ratio for the BFIs. NRB’s Monetary Policy has previously included provisions to facilitate loan classification and provisioning for businesses affected by unforeseen circumstances, showcasing the central bank’s capacity for such tailored interventions.

Looking Ahead: NRB’s Deliberation and Potential Actions

The meeting, which included key NRB officials like Deputy Governor Bam Bahadur Mishra and FNCCI representatives like Vice Presidents Surkrishna Vaidya, Hemraj Dhakal, and Treasurer Bharat Raj Acharya, suggests the central bank is giving the matter due weight.

The NRB’s decision will be a careful balancing act. On one hand, it must support the real economy—the businesses and industries that employ people and generate GDP—by providing necessary liquidity and breathing room. On the other hand, it must uphold its primary mandate of maintaining financial stability and safeguarding the prudence and discipline of the financial system.

Historically, the NRB has shown a willingness to accommodate such requests during periods of severe economic disruption, such as the 2015 earthquake, the Terai protests, or the COVID-19 pandemic. The central bank may choose to implement a selective extension, perhaps targeting businesses in the most severely affected regions by floods and protests, or offering a general, short-term deferral (e.g., 15 to 30 days) of the quarterly payment deadline for all borrowers. It is also possible that they will waive the imposition of penal interest during the extended period, which has been a recurring demand of the FNCCI in past crises.

The private sector’s ability to recover from a combination of disruptive protests, natural disasters, and festive shutdowns hinges on the Central Bank’s forthcoming policy decision. A timely and supportive intervention by the NRB is crucial to prevent widespread loan defaults and ensure that the foundational pillars of the Nepali economy remain stable and poised for recovery in the coming quarter.

For More: FNCCI Requests for Extension