NRB Under Mounting Pressure to Ease Credit Blacklisting Rules to Revive Economic Activity

Nepal Rastra Bank (NRB) is under mounting pressure to relax provisions related to the credit blacklist maintained by the Credit Information Bureau (CIB), as stakeholders argue that rigid rules are constraining lending and slowing economic activity.

Industrialists, traders, government agencies and financial experts have urged the central bank to ease blacklisting provisions, citing them as a key reason behind weak credit growth despite ample liquidity in the banking system.

Most recently, a Banking Sector Reform Recommendation Taskforce, led by former chairman of SEBON Dr Rewat Bahadur Karki, also recommended a review and reform of blacklist-related rules to fully revive economic activity.

According to the taskforce report, the number of blacklisted individuals and entities surged from 2,537 in mid-June 2019 to 132,000 by May 2025. Of those added to the blacklist, about 25 percent were due to loan defaults, while 75 percent resulted from cheque dishonour cases.

The report noted that revising blacklisting provisions could expand the borrower base and increase the mobilisation of banking resources.

Based on these recommendations, NRB has already announced in its monetary policy for fiscal year 2025/26 that it will introduce policy-level facilitation in cases involving cheque dishonour. This comes at a time when banks are flush with excess liquidity and interest rates have fallen to single digits, yet credit expansion remains subdued.

NRB Executive Director and Spokesperson Guru Prasad Paudel said growing pressure to ease the blacklist provisions stems largely from the sharp rise in cheque dishonour cases.

“The number of people blacklisted due to cheque dishonour alone has crossed 100,000,” Paudel said while speaking at an NRB discussion programme on economic and financial conditions on Wednesday. “There are suggestions to make the blacklisting provisions more flexible, and we are currently holding discussions on what can be done.”

Echoing similar concerns, Mahesh Bhattarai, Joint Secretary at the Ministry of Finance, said the current system of immediately blacklisting individuals for cheque dishonour and barring them from all banking transactions was not appropriate.

“Before blacklisting, there should be a provision to place individuals on a grey list at least three times,” Bhattarai said. “This could help address some of the existing problems.”

NRB is also discussing separating records of loan defaulters and cheque dishonour cases within the Credit Information Center and easing the restrictions imposed after blacklisting for cheque-related offences. At present, both loan misuse and cheque dishonour are treated under a single blacklist, barring individuals from opening bank accounts or accessing loans from banks and financial institutions.

Currently, even borrowers with loans below Rs 1 million and those involved in cheque dishonour cases are blacklisted. NRB proposed creating a separate defaulter list after the number of blacklisted individuals surged, but the directive has yet to be enforced.

While cheques remain one of the easiest and most widely used payment instruments, they have increasingly been misused for fraud. Failure to honour cheques issued for personal and institutional transactions has led to a sharp rise in blacklist cases.

NRB had earlier introduced some flexibility by issuing the Cheque Dishonour Verification Procedure, 2025, requiring banks to notify account holders and allow 45 days to settle payments before formally declaring a cheque dishonoured. These changes were introduced by amending the Banking Offences and Punishment Act, 2008.