In case, such credit has been extended, they should not be renewed, the directive issued on Friday said.[break]
“The latest change means the central bank wants people like board members, chief executives and management-level staff to focus solely on work and not think of ways to multiply their fortune,” Anal Bhattarai, CEO of Commerz and Trust Bank, told Republica.
Although Bhattarai praised the central bank for barring CEOs and employees from acquiring loans that could be used for business and commercial purpose, he was critical of the condition that also prevented board members from getting such credit.
“Since most of the board members of most of the banks are businessmen this change will affect them the most,” he said.
The latest central bank directive has also limited the ceiling of overdraft loans or personal loans to Rs 10 million.
Although this rule comes into effect immediately in cases of fresh loans, banks and financial institutions that have already issued overdraft loans in excess of Rs 10 million can renew those till mid-July 2013.
The directive also says banks and financial institutions have to make 20 percent additional provisioning on third-party collateralized loans as their condition deteriorates from good to sub-standard, doubtful and bad loans.
Among others, banks and financial institutions have also been prevented from cashing postdated checks in advance, while home loans extend by a bank or financial institution to its employee, as per the company bylaw, can be risk-weighed at 60 percent.
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