Central bank plans to spare group loan members from blacklisting over one defaulter

Nepal Rastra Bank is preparing to amend its rules so that when a loan taken under group guarantee goes unpaid, only the defaulter—not the rest of the group's members—is blacklisted.

A director at the central bank said the change is being considered because the entire group has been getting blacklisted whenever one member fails to repay a loan taken under group guarantee from a microfinance institution. According to him, about 10 to 15 members of a group end up blacklisted because of one member's arrears.

Microfinance institutions provide loans under group guarantee ranging from about Rs 40,000 to Rs 1.5 million. He cited an example in which one person's failure to repay a loan of about Rs 300,000 put other members of the group at risk as well.