Nepal's central bank permits banks to borrow from abroad

Nepal's central bank has paved the way for domestic commercial banks to borrow from foreign banks and financial institutions to address the liquidity crunch in banking system in the last few months, a Nepal Rastra Bank (NRB) official said on Friday.

It is for the first time that Nepali banks have been allowed to borrow from abroad. Other firms can borrow from abroad.

"A meeting of the board of directors of the central bank endorsed a proposal on allowing domestic commercial banks to borrow from foreign banks and financial institutions," Rajendra Pandit, assistant spokesperson of NRB, told Xinhua news agency.

Domestic banks could borrow loans up to 25 per cent of their core capital, he said.

"The banks can borrow loans for the period from one year to five years to finance only in the productive sector such as agriculture, tourism, hydropower and outer infrastructure projects," said Pandit. 

"Borrowed loans from abroad cannot be used to lend to the real estate, share market and imports," he said.