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By Sandeep Chaudhary

No More Single Borrower Restriction: NRB Frees Credit Exposure Rules in 2025 Directive

No More Single Borrower Restriction: NRB Frees Credit Exposure Rules in 2025 Directive

In a bold financial reform, Nepal Rastra Bank (NRB) has officially lifted the Single Borrower Restriction, allowing banks and financial institutions greater flexibility in extending credit to individual borrowers or related groups. This major amendment, introduced through the Unified Directives 2082 (2025 AD), represents a decisive shift in Nepal’s credit exposure policy and banking autonomy.

Background: The Old Restriction

Until now, banks were bound by the Single Obligor Limit (SOL), which capped total credit exposure to a single borrower or a group of related parties at NPR 25 crore. Any loan or guarantee exceeding that threshold required prior approval from NRB. The policy aimed to safeguard the banking system against overexposure and prevent undue risk concentration.

The New Directive: Full Autonomy on Credit Exposure

Under the 2025 directive, NRB has completely removed this ceiling, freeing banks to determine loan sizes based on their own internal credit appraisal and risk assessment frameworks. This marks a transition from regulator-controlled lending to a bank-driven responsibility model, encouraging proactive financing of large-scale industrial, hydropower, and infrastructure projects.

Why NRB Made the Change

The central bank’s latest move aligns with the government’s broader vision of stimulating economic growth through credit expansion. With record-high liquidity and sluggish credit growth in the banking sector, NRB’s goal is to revitalize lending momentum and unlock funds for productive sectors. The reform empowers banks to support mega projects and corporate borrowers that were previously constrained by the NPR 25 crore cap.

Implications for Banks

Banks now enjoy expanded lending flexibility, allowing faster approvals and larger financing packages. However, this autonomy comes with greater risk management accountability. Institutions must reinforce their credit governance systems, set exposure limits internally, and ensure that concentration risks are monitored closely.

Impact on Businesses

For corporate and industrial sectors, this reform could be transformative. Businesses in energy, manufacturing, and construction can now access larger financing without procedural delays. The policy is expected to drive investment, accelerate project execution, and enhance the overall economic activity. Yet, it also demands financial discipline and transparent borrower practices to prevent misuse.

Regulatory Oversight Continues

While the central ceiling has been removed, NRB has made it clear that accountability remains unchanged. Banks and management teams will be held responsible if excessive risk exposure threatens financial stability or violates prudent lending norms.

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