In recent times, the use of digital payment system has increased significantly while making payments for any transaction. Recent data shows that Nepal has more than 54 million digital transactions per month. In digital payment system, payments are made without physical presentation of the Customer. The medium used for digital payments mainly include Mobile Banking, Internet Banking, Mobile Wallet, Payment Card, Real Time Gross Settlement (RTGS) and Inter Bank Transfer etc. The institutions facilitating the digital payments mainly include Bank and Financial Institutions and the Payment Service Providers (PSPs).

Recently, Nepal Rastra Bank (NRB) has issued Guideline on “Digital Lending” to facilitate the process of loan application, approval and disbursement through digital medium without physical presence of the customer. The main objective of this guideline is to:

• Develop digital lending system and make the customers familiar with it,
• Simplify the regular process of loan disbursement,
• Fulfill the increasing expectations of the customers,
• Increase the reach of general public in lending process,
• Reduce the cost of loan disbursement

Banks and Financial Institutions can provide the service directly or they can enter into agreement with PSPs to act as their agent. Banks and FIs have to arrange a separate portal to receive the loan application digitally or they can receive the applications through Mobile App. Banks and FIs shall inform the customers clearly about applicable fees before disbursing the loan. They can charge only the loan service charge and fee to be paid to third party.  In case PSPs are to be involved as authorized representative in the loan process, no additional fee shall be charged and the Bank and FIs have to bear the fees of PSPs. Bank and FIs and the PSPs shall ensure the security of all information and documents received digitally about the customers. PSPs shall be clear with the customer about the bank from where the customer wants to avail loan and PSPs shall not try to manipulate the customer to avail loan from any specific bank.

PSPs are required to develop an automated system to facilitate loan application, customer evaluation, obtaining credit information, providing information of loan approval, loan disbursement and principal/ interest recovery.

Limit and period of Digital Lending

Bank and Financial Institutions can provide digital loan up to NPR 5 lakh to the customers having bank accounts where salary, professional or business income are deposited regularly and up to NPR 2 lakh to other customers. The maximum period of such loan shall be 3 years. Repayment of the loan can be made in installment or at once.

Process Flow for Digital Loan

Reanda Biz Serve Comments

This is a great initiative taken by the NRB to introduce the system of digital lending in preparation towards cashless economy. This will simplify the loan process and reduce the cost of lending significantly. Further, at the time of such pandemic like COVID, it will greatly serve to keep the people safe as no physical presence is required.

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