Kathmandu, July 17: Nepal Rastra Bank (NRB) is set to introduce a system of providing personal loans based on credit scores starting from this fiscal year.
Although a similar provision had been included in the Monetary Policy of 2081 BS, it was not implemented at the time. Now, the central bank plans to actively implement credit score-based lending in this fiscal year.
Clause 103 of the recently announced Monetary Policy clearly states that banks and financial institutions (BFIs) will adopt a policy of issuing loans based on customers’ credit scores.
Kiran Pandit, NRB spokesperson and executive director, said that credit score-based personal lending is a global practice, and Nepal is preparing to adopt it too. He emphasized the need for necessary infrastructure before implementation. Pandit explained that microfinance institutions already assess credit history before issuing loans, and once a good credit score is established, individuals can access loans from BFIs without collateral.
He stated that loans can be issued if an individual’s financial behavior reflected by the credit score is positive. “The credit score is primarily about identifying the customer,” he said. “It will be determined based on the individual’s payment history—such as water, electricity, telephone bills, and other utility payments.”
To maintain a good credit score, individuals will now need to pay their electricity bills to the Nepal Electricity Authority, taxes to the Inland Revenue Department, telephone bills to Nepal Telecom, and traffic fines on time.
Similarly, borrowers who repay their loan installments to banks and financial institutions on time will be eligible for future loans based on their payment history.
However, those who fail to make timely utility payments will have lower chances of getting loans based on their scores, as their credit score will drop. With credit scoring in place, it will become much easier for banks to identify reliable borrowers.
People’s New Monitoring Service
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