NRB allows up to 5% extra foreign currency for foreign study expenses, Expands digital lending framework

KATHMANDU: Nepal Rastra Bank (NRB) has introduced new facilitation measures for students going abroad for higher education, allowing banks and financial institutions to approve up to 5 percent additional foreign currency beyond the prescribed requirement for educational expenses.

The central bank said the relaxation is aimed at reducing procedural difficulties caused by currency fluctuations and making foreign exchange services more flexible for students pursuing international studies.

Easier Foreign Exchange for Students

Amending its Integrated Foreign Exchange Directive, NRB has allowed students applying for visas, visa renewals, or living expenses to maintain up to 5 percent more foreign currency in their bank accounts than the officially required amount.

The provision applies when foreign universities, embassies, or government authorities of the destination country require proof of bank balance for admission or visa processing.

According to NRB, the additional allowance is intended to cover uncertainties arising from exchange rate fluctuations and related financial discrepancies while sending funds abroad.

The facility applies to currencies in countries outside India and covers transactions denominated in convertible foreign currencies such as US dollars and others.

Living Expense Limit and Other Facilities

Under existing provisions, Nepali students abroad are eligible to receive USD 2,500 to USD 5,000 per year as living expenses from Nepal through their guardians.

Other academic and institutional fees can also be remitted based on verified documentation from educational institutions.

NRB has also clarified that required documents submitted for foreign exchange approvals must generally be in original form. However, documents certified through electronic signatures under the Electronic Transactions Act, 2006 will also be considered valid.

Push Toward Digital and Paperless Banking

The central bank has simultaneously strengthened provisions for digital documentation and online verification systems, aligning foreign exchange services with its broader digital financial infrastructure strategy.

This includes recognition of digitally signed documents and electronically verified records, helping reduce physical paperwork and speed up approval processes.

Expansion of Digital Lending Framework

Alongside foreign exchange facilitation, NRB has further clarified and expanded its Guidelines on Digital Lending, 2078 (First Amendment) under its Payment Systems Department.

The framework is designed to strengthen Nepal’s growing digital financial ecosystem, which has expanded rapidly due to mobile banking, digital wallets, real-time payments, and internet banking systems.

The guidelines are based on legal authority provided under the Nepal Rastra Bank Act, 2058, and were originally approved in 2021 with amendments introduced in 2026.

Objectives of Digital Lending Framework

According to NRB, the core objectives of the digital lending policy include:

• Expanding digital credit access across individuals and SMEs
• Simplifying loan application and disbursement processes
• Reducing transaction costs for small-value loans
• Enhancing financial inclusion through technology
• Ensuring faster credit flow even during emergencies
• Promoting transaction-based lending models for SMEs

Digital Loan Limits

The revised framework allows banks and financial institutions (BFIs) to extend loans through digital platforms with the following limits:

• Up to Rs 500,000 for salaried, professional, or business account holders
• Up to Rs 200,000 for other individual borrowers
• Up to Rs 500,000 short-term working capital loans for MSMEs
• Up to Rs 1,000,000 long-term working capital loans for MSMEs (based on BFI policy)

Repayment periods vary from one to three years depending on the borrower category.

Use of Technology in Credit Assessment

BFIs are allowed to use electronic transaction histories, payment records, and business data for credit analysis. They may also collaborate with Payment Service Providers (PSPs) and Technology Service Providers (TSPs) to evaluate borrower eligibility.

However, NRB has clearly stated that all financial risk remains with the lending bank or financial institution, even when third-party technology providers are involved.

Stronger Data Protection and Compliance Rules

The guidelines impose strict requirements on data protection, customer consent, and confidentiality. Banks must ensure that:

• Customer data is used only for credit evaluation
• Information is not shared without explicit consent
• Digital records are securely stored
• Anti-money laundering (AML) and CFT checks are fully integrated

BFIs must also submit quarterly reports on their digital lending portfolio to NRB.

Digital Documentation Recognised

In a major step toward paperless banking, NRB has allowed digitally signed documents under the Electronic Transactions Act, 2006 to be accepted in loan and foreign exchange processing.

This move is expected to significantly reduce delays in processing student remittances and digital loan applications.