NRB allows loan restructuring for businesses displaced by highway expansion

KATHMANDU: Nepal Rastra Bank (NRB) has issued a new regulatory circular directing all A, B and C class banks and financial institutions (BFIs) to implement a revised provision allowing the restructuring and rescheduling of loans for businesses displaced by major highway expansion projects.

The central bank introduced the provision through an amendment to the Unified Directives 2082 (2025) issued to BFIs licensed by NRB.

According to the circular, banks and financial institutions can restructure or reschedule loans provided to enterprises affected by the expansion of the Mahendra Highway and the Mid‑Hill Highway.

NRB stated that many businesses operating along these strategic national highways have been displaced due to road widening and infrastructure development works, affecting their cash flow and repayment capacity.

Loan restructuring provision

Under the revised directive, BFIs are allowed to restructure or reschedule such loans upon the borrower’s request after conducting a proper analysis of:

Cash flow of the borrower

Business income and repayment capacity

Financial necessity and justification for restructuring

The central bank has, however, imposed specific conditions to ensure financial discipline.

Banks must recover at least 10 percent of the interest amount due before approving any loan restructuring or rescheduling.

Deadline for implementation

NRB has set a deadline for the implementation of the relief measure. According to the circular, loan restructuring or rescheduling must be completed by the end of the Nepali fiscal month of Asar 2083 (mid-July 2026).

This timeline provides a limited window for affected businesses to request relief and for financial institutions to process the restructuring.

Loan classification rules remain unchanged

The central bank has also clarified that when loans are restructured under this special provision, banks must maintain the same loan classification category that existed prior to restructuring.

This means BFIs cannot artificially upgrade the credit category of such loans and must continue maintaining appropriate loan loss provisioning as required by regulatory standards.

Support for businesses affected by infrastructure projects

NRB said the policy adjustment aims to support businesses that were forced to relocate or suffered operational disruptions due to large-scale road expansion projects.

The Mahendra Highway and Mid-Hill Highway projects, two of Nepal’s largest national transport corridors, are currently undergoing extensive expansion works to improve connectivity, logistics efficiency, and regional economic integration.

However, the road widening has resulted in the relocation or closure of many roadside enterprises including hotels, retail shops, transport service centers, and small manufacturing units.

By allowing temporary loan restructuring, NRB expects banks to reduce financial stress on affected borrowers while maintaining stability in Nepal’s banking system.

The circular has been formally issued to all licensed banks and financial institutions operating under the supervision of Nepal Rastra Bank, requiring them to implement the revised directive immediately.