NRB gives 6-month blacklist relief to borrowers

25th February 2026, Kathmandu

The financial regulatory landscape in Nepal has witnessed a major pivot as Nepal Rastra Bank (NRB) officially announced a significant relief measure for distressed borrowers during the mid term review of the monetary policy for the fiscal year 2082/83. Under this new directive, the central bank has introduced a provision that allows for a temporary suspension of blacklisting for up to six months for individuals and businesses facing genuine repayment difficulties. This move comes at a time when the number of blacklisted entities in Nepal has reached record highs, driven by a combination of a domestic economic slowdown, high interest rates, and disrupted cash flows in key sectors like construction, retail, and manufacturing. By providing a structured grace period, the central bank is attempting to rescue viable businesses from the terminal stigma of blacklisting, which often leads to the complete freezing of their financial operations and legal standing.

NRB gives 6-month

The core of this policy is the distinction between willful defaulters and those suffering from involuntary financial hardship. According to the Nepal Rastra Bank, borrowers who are currently on the blacklist maintained by the Credit Information Bureau (CIB) can apply for a temporary removal if they can present a justifiable and valid reason for their inability to meet their debt obligations. Once a bank or financial institution (BFI) verifies these reasons, the borrower can be granted a stay on their blacklisted status for a period of up to half a year. During this window, the borrower is expected to work on a credible repayment plan or seek loan restructuring. This pragmatic approach recognizes that a blacklisted business loses its ability to open bank accounts, issue cheques, or secure letters of credit, which effectively kills its chance of generating the revenue needed to pay back the bank.

The background of this decision is rooted in the alarming statistics regarding credit defaults over the last two years. As the Nepali economy struggled with low aggregate demand and high inflation, thousands of small and medium enterprises (SMEs) found themselves unable to service their loans. The subsequent rise in blacklisting cases created a ripple effect, where even healthy businesses found their supply chains broken because their partners were suddenly unable to transact. Stakeholders, including the Federation of Nepalese Chambers of Commerce and Industry (FNCCI), have long argued that the previous regulatory rigidity was counterproductive. The new six month relief window is a direct response to these concerns, aiming to lower the overall financial stress in the private sector while maintaining the basic principles of credit discipline.

For banks and financial institutions, the implementation of this relief measure requires a delicate balancing act. The central bank will issue specific circulars to ensure that the provision is applied uniformly and is not misused by those who have the capacity but not the intention to pay. BFIs are expected to conduct a thorough assessment of the borrower’s financial statements, historical repayment behavior, and the external factors affecting their industry. This level of scrutiny is essential to prevent moral hazard, where borrowers might take advantage of the grace period to divert funds rather than settling their dues. The relief is intended to be a lifeline, not a loop hole, and the monitoring of repayment behavior during these six months will be intensive.

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The economic implications of this policy could be far reaching. If implemented effectively, it could improve the non performing loan (NPL) ratios of commercial banks by encouraging settlements that were previously stuck in legal limbo. By allowing businesses to remain operational, the government ensures that employment levels are maintained and that the tax base does not shrink further. Furthermore, the relief measure is expected to boost business confidence, signaling that the regulator is sensitive to the ground realities of the market. This psychological shift is often as important as the financial one, as it encourages entrepreneurs to stay in the formal economy and continue their efforts toward business recovery rather than fleeing the market due to the fear of social and legal ostracization associated with being blacklisted.

However, the six month window is not an unconditional pardon. The central bank has clarified that if a borrower fails to show significant progress toward repayment or fails to adhere to the agreed restructuring terms by the end of the period, the blacklisting will be reinstated immediately. This ensures that the disciplinary function of the Credit Information Bureau remains intact. The policy is a strategic pause designed to allow the economy to breathe. For many borrowers, this time can be used to sell off non core assets, recover their own outstanding receivables, or bring in new equity partners. In a landscape where land and property prices have remained stagnant, providing more time for asset liquidation is a practical move that benefits both the lender and the borrower.

Looking ahead to the remainder of 2082, the success of this measure will be the primary benchmark for the central bank’s responsiveness. If the relief leads to a significant reduction in the number of permanent defaults and a revitalization of the SME sector, it may become a permanent feature of the regulatory toolkit for times of economic crisis. On the other hand, if it results in a spike in evergreen loans or hidden defaults, the regulator may be forced to revert to a more stringent stance. For now, the Nepali business community has a crucial six month opportunity to reset its financial health and contribute to the nation’s economic stabilization. The move is a testament to the evolving maturity of Nepal’s financial governance, which is moving toward a more rehabilitative and growth oriented model.

In conclusion, the six month blacklist relief introduced by Nepal Rastra Bank is a calibrated and timely intervention in a stressed credit market. By prioritizing the survival of genuine businesses, the central bank is protecting the long term stability of the entire financial system. As commercial banks begin to process these relief applications, the focus must remain on transparency and accountability. For the thousands of borrowers currently in distress, this policy offers a rare second chance to restore their financial credibility and play their part in the post 2082 economic recovery of Nepal.

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