Sources to be disclosed when depositing more than 1 lakh in microfinance

KATHMANDU: A microfinance financial institution now requires the source to be disclosed when collecting a deposit of one lakh or more. Through the integrated instructions released for Microfinance Financial Institutions, this arrangement has been made by the Nepal Rastra Bank.

When depositing cash amounts of at least Rs 10 lakhs in a single day or repeatedly, there is an outdated requirement to notify NRB. With the implementation of this provision, microfinance financial institutions must now find funding for deposits of at least one lakh rupees.

The directive stated that microfinance institutions must ask customers to identify the source of their money before accepting savings or deposits of one lakh rupees or more. The central bank has a strict policy on deposit collection at a time when microfinance organizations are once more ‘lobbying’ for the rule that permits multiple organizations to grant loans to the same borrower.

Based on the finding that excessive distortion in microfinance financial institutions has resulted from uncontrolled lending, the NRB has implemented a policy stating that only one institution may make loans to any given individual.

Internal and external auditors should keep an eye on the AML/CFT system in microfinance as well. During this monitoring, it should be ensured that high-ranking individuals, high-risk countries, regions, and high-risk products, equipment, services, and transactions are being watched. The National Bank also carried it out.

According to the directive, “the organization shall develop a suitable information technology system and related procedures to provide reports or information and ensure timely submission of reports.”

The organization shall also “determine the program to be carried out in relation to prevention of financial investment in money laundering and terrorist activities, based on the risk, and the program shall be included in its annual budget.”. And ought to be incorporated into the plan.’

If it turns out that the customer will be informed of the suspected matter when moving forward with the customer identification process for the suspicion that a customer is involved in money laundering or terrorist activities, the NRB has also made arrangements to submit a suspicious transaction/activity report to the Financial Information Unit without proceeding with the customer identification process.

The amount of time that microfinance financial institutions have to send information to the credit information center has also been set. Now, within seven days of disbursing a loan, the organization must submit to the credit information center all loans and facilities that it has approved.

The instruction states, “The authorized institution must obtain mandatory loan information from the loan information center before accepting the loan. All loans/facilities that are overdue by more than three months (90 days) must be submitted within 15 days of monthly payment.

Earlier, NRB revised the previously stated policy and stipulated that only one institution could grant loans to a single individual, while also lowering the maximum amount that could be borrowed and tightening dividend distribution guidelines. The stability of microfinance institutions is currently compromised by this arrangement, and as a result, the microfinance institutions have requested that the arrangement be relaxed for a while.

The poor class of citizens has suffered as a result of past errors made by some microfinance institutions. The central bank has made the policy system more stringent in order to prevent these distortions. Although the NRB has established a maximum loan amount, many microfinance institutions have historically given out loans in excess of this amount.

Small borrowers face difficulties as a result of the unethical practices of microfinance organizations, which first grant loans by offering various inducements and later force them to recoup them. It has been discovered that 13 microlending organizations have invested in the same borrower. Due to their inability to make their microloan payments in the past few months, many people have been forced to leave.