Nepal Rastra Bank (NRB) has eased several long-standing restrictions on working capital loans, giving banks and financial institutions (BFIs) far more discretion over loan tenure, repayment terms, and priority-sector exposure. The changes, unveiled through the mid-term review of the Monetary Policy for Fiscal Year 2025/26 and reinforced through subsequent amendments to the Working Capital Loan Guideline, 2079, mark the most significant relaxation of business lending rules in Nepal since the original guideline triggered widespread protest from the private sector back in 2022.
If you run a business in Nepal that depends on a cash credit line, an overdraft, or a permanent working capital facility, these changes directly affect how much you can borrow, how long you have to repay it, and how strictly your bank will monitor your account balance through the year.
Key takeaways
- BFIs can now set their own tenure and limits for permanent working capital loans, instead of the earlier fixed 3-to-10-year band.
- The mandatory "clean-up" threshold for cash credit accounts has been relaxed from 10 percent to 30 percent of the outstanding limit.
- Priority-sector lending now explicitly includes tourism, IT, and export-oriented industries using domestic raw materials, alongside agriculture, energy, and MSMEs.
- Borrowers facing genuine hardship will not be automatically blacklisted, and existing blacklisted borrowers may get temporary relief for up to six months.
- The original 2022 cap limiting working capital loans to 25 percent of annual turnover still applies as the baseline rule for most businesses.
Why the Working Capital Loan Guideline Existed in the First Place
Nepal Rastra Bank introduced the Working Capital Loan Guideline, 2079 (2022) after regulators noticed a troubling pattern: businesses were taking short-term working capital loans meant for inventory, payroll, and day-to-day operations, then quietly parking that money in real estate or the stock market instead. The guideline was designed to stop the misuse of loans taken to meet short-term commercial needs, discouraging practices where borrowers diverted such funds into speculative investments after obtaining them from banks and financial institutions.
The original rule capped working capital loans at 25 percent of a business's annual turnover and required borrowers exceeding that limit to bring their exposure down over a fixed repayment schedule. Under those rules, businesses could avail of 25 percent of their annual turnover as working capital loans, and borrowers with loans exceeding this threshold were required to adjust their credit exposure within the limit by a set deadline. Business associations, including the Federation of Nepalese Chambers of Commerce and Industry, argued the rule was too blunt an instrument and was choking off legitimate working capital needs during a period of slow credit growth.
What Changed in the 2026 Update
1. Banks Now Set Their Own Loan Tenure
The single biggest shift concerns permanent working capital loans, the recurring facilities businesses use to fund inventory, receivables, and routine operating costs. Previously, NRB fixed the repayment period for permanent working capital loans between three and ten years. Under the new provision, banks and financial institutions can determine the tenure of such loans after assessing the borrower's cash flow and financial condition. With this change, banks can now set the minimum and maximum limits for such loans after analyzing the nature of the business, sector, and cash flow, rather than applying a one-size-fits-all rule.
2. The Cash Credit "Clean-Up" Rule Is Far Less Strict
Cash credit and overdraft borrowers previously had to bring their outstanding balance down to a small fraction of their approved limit for at least a week each year, a rule meant to prove the facility was genuinely being used for short-term cycles rather than as permanent capital. The central bank has eased this controversial provision requiring borrowers to reduce their working capital loan outstanding by at least 10 percent for at least seven consecutive days each year; this threshold has now been revised to 30 percent. In practice, this gives businesses considerably more breathing room to manage seasonal cash flow without breaching compliance.
3. Priority-Sector Lending Has Been Broadened
NRB has expanded priority sector lending to include IT and tourism industries, alongside the existing focus on agriculture, energy, and micro, cottage, and small enterprises, as part of a push toward digital payments and technology infrastructure financing. The revised framework specifically broadens the definition of priority sectors to include tourism, information technology, and export-oriented industries that rely on domestic raw materials, and the mandatory minimum lending ratios BFIs must maintain in each sector are also being revised.
4. Relief for Loan Classification and Blacklisting
The central bank has reiterated that borrowers unable to immediately repay loans due to genuine circumstances will not be automatically blacklisted, and banks may remove already-blacklisted borrowers from the list for up to six months, subject to valid justification, to facilitate recovery of outstanding dues. Businesses affected by highway expansion projects also received targeted relief: loans extended to businesses displaced by the expansion of the East-West Highway and the Mid-Hill Highway can be restructured or rescheduled at a minimum interest rate of 10 percent until mid-July 2026.
5. A Separate Window for Loan Re-Tabulation
Alongside the monetary policy review, NRB issued a direct amendment to the Working Capital Loan Guideline itself, addressing periodic (revolving) working capital facilities. The periodic nature of such a loan can be re-tabulated once, based on need and justification after analyzing the borrower's cash flow and financial statements, and this re-tabulation is not treated as a re-scheduling for loan classification or loan-loss provisioning purposes.
| Rule | Before 2026 | After the 2026 update |
|---|---|---|
| Tenure of permanent working capital loans | Fixed at 3 to 10 years by NRB | Set by each bank based on borrower cash flow |
| Cash credit clean-up requirement | Outstanding below 10% of limit for 7 days/year | Outstanding below 30% of limit for 7 days/year |
| Priority sectors | Agriculture, energy, MSME | Adds tourism, IT, and export-oriented industries |
| Blacklisting for genuine hardship | Stricter, limited flexibility | Temporary relief up to 6 months possible |
| Overall working capital cap | 25% of annual turnover | Unchanged as the baseline rule |
What this means for your business
If your bank previously forced you into a rigid repayment schedule regardless of your actual cash cycle, you now have grounds to ask for a tenure and limit review based on your real financial statements. Approach your relationship manager with updated cash-flow projections rather than waiting for the bank to initiate the conversation.
Why NRB Is Easing These Rules Now
The relaxation comes against a backdrop of sluggish private-sector credit growth and a persistent liquidity surplus in the banking system. Rather than cutting policy rates, NRB has chosen to keep core monetary tools such as the interest rate corridor, bank rate, cash reserve ratio, and statutory liquidity ratio unchanged, while instead loosening operational constraints that were seen as discouraging legitimate borrowing. The central bank also raised the ceiling on how much of their core capital banks can invest in non-deliverable forward instruments abroad, from 25 percent to 30 percent, a move aimed at helping banks deploy surplus funds when domestic credit demand is soft.
What has not changed
The foundational 25-percent-of-turnover cap on working capital loans remains in place. This update expands flexibility around tenure, monitoring, and priority sectors, it does not remove the underlying ceiling on how much working capital financing a business can access relative to its turnover.
Common Mistakes Businesses Make With Working Capital Loans
- Treating a cash credit line as permanent capital. Even with the relaxed 30 percent clean-up threshold, examiners still expect visible movement in the account through the year.
- Diverting funds into non-operating uses. Using working capital financing for land purchases or share market investment remains the exact behavior these guidelines were designed to prevent, and it can trigger reclassification of the loan.
- Not renegotiating tenure after the update. Many existing borrowers are still on old fixed terms simply because they have not asked their bank to reassess them under the new discretion rules.
- Ignoring documentation for priority-sector benefits. Tourism, IT, and export businesses that qualify for priority-sector treatment should confirm their sector classification with their bank in writing.
Frequently Asked Questions
Does the 25% of turnover limit on working capital loans still apply in 2026?
Yes. The 2026 update changes how tenure, repayment monitoring, and priority sectors are handled, but the underlying rule that working capital loans generally cannot exceed 25 percent of a business's annual turnover, introduced under the original 2022 guideline, remains the baseline framework.
Can I ask my bank to extend my existing working capital loan's repayment period?
You can request a review. Since banks can now set tenure based on their own assessment of your cash flow and financial statements, it is worth asking your bank to reassess an existing facility, especially if the original 3-to-10-year band did not fit your business cycle.
What is the new cash credit clean-up rule?
Borrowers with cash credit or overdraft facilities must still bring their outstanding balance down for at least seven consecutive days a year, but the threshold has been eased from 10 percent of the approved limit to 30 percent, making it easier to comply without disrupting operations.
Which sectors now count as priority sectors for lending?
Agriculture, energy, and micro, cottage, and small enterprises remain priority sectors, and the 2026 framework adds tourism, information technology, and export-oriented industries that use domestic raw materials.
Will I be blacklisted if I cannot repay my working capital loan on time?
Not automatically. NRB has reiterated that borrowers facing genuine hardship should not be blacklisted automatically, and banks have discretion to grant temporary relief, including removing existing blacklisted borrowers for up to six months where justified.
Where can I read the official NRB guideline and amendments?
The authoritative source is Nepal Rastra Bank's own website at nrb.org.np, where the Working Capital Loan Guideline, 2079, its amendments, and the full text of each Monetary Policy review are published. Because these provisions are refined periodically, always confirm the latest wording with your bank or the NRB website before making borrowing decisions.
Conclusion
The 2026 update to Nepal's working capital loan framework reflects a broader shift in NRB's approach: rather than tightly prescribing every operational detail, the central bank is giving banks more room to underwrite based on actual business fundamentals, while still preserving the guardrails that stop working capital financing from being diverted into speculation. For business owners, the practical next step is simple: review your existing working capital facility against these changes and have a documented conversation with your bank about whether your tenure, limit, and sector classification still make sense.
This article reflects publicly reported details of NRB's Working Capital Loan Guideline, 2079, its amendments, and the mid-term review of the Monetary Policy for FY 2025/26 as of mid-2026. Regulatory provisions are refined periodically; confirm current terms directly with your bank or NRB before making financial decisions.
Discussion