KATHMANDU: Nepal Rastra Bank (NRB) has tightened rules on vehicle and other retail loans, requiring banks and financial institutions to continuously monitor borrowers’ debt-to-income (DTI) ratios throughout the loan period.
In a circular issued on Monday, the central bank directed lenders to regularly update customers’ DTI details for vehicle loans, home loans, personal term loans, overdrafts, and hire purchase facilities. Borrowers will now be required to submit updated income and installment details to the concerned bank until the loan is fully repaid.
Previously, banks collected DTI information only at the time of loan approval. There was no requirement to update these details after disbursement.
The DTI ratio measures how much of a borrower’s income goes toward paying loan installments. Currently, NRB has capped this ratio at 50 percent for personal term loans and hire purchase loans, meaning borrowers can allocate a maximum of half their income to loan repayments.
NRB has also warned that if banks disburse loans beyond the prescribed DTI limits, such loans must be placed under the “watchlist” category, signaling higher risk and closer supervision.
The new provision is expected to make vehicle financing stricter and encourage more responsible lending and borrowing in the retail loan segment.
