Banking Exam Question - What is Consortium Financing? What are the NRB Directives About Consortium Financing in Nepal? Explain

Introduction - Consortium Financing

In the financial world, a consortium refers to several lending institutions that group together to jointly finance a single borrower. These multiple banking arrangements are very similar to a loan syndication, although there are structural and operational differences between the two. For now on-wards, borrowers will have to seek consortium financing from the banks and financial institutions (BFIs) for loans amounting to Rs 500 million and above.

Issuing a circular, Nepal Rastra Bank (NRB) — the focal administrative and fiscal expert — has taught the class 'A', 'B' and 'C' monetary foundations to issue bigger measure of credit just in consortium. This move of the national bank is gone for controlling numerous managing an account hones and is relied upon to help keep up budgetary teach. 

After the guideline of the NRB, new credits adding up to Rs 500 million or more will be issued on consortium premise. According to the heading, borrowers who have effectively taken advance of the said sum should change over their credits to consortium financing inside this monetary.