Central Bank to Cap Loan Interest Rate

March 17: A, B and C listed banks and financial institutions (BFIs) can now increase their loan interest rate only twice annually. On Thursday, Nepal Rastra Bank (NRB), publishing its concept paper on provision of setting and reviewing interest rate, set time limit on setting loan interest rate.

NRB through its concept paper has formulated a mechanism under which if BFIs tend to increase interest rate on loans with above a year maturation period, it must inform the debtors prior to 45 days.   Similarly, BFIs will have to inform debtors 30 days before increasing interest rate on renewable loans and other short-term loans. NRB has also requested to provide suggestions (if any) on the concept paper within seven days.

The central bank brought the concept paper to control haphazard increase in loan interest rate by BFIs,” said Narayan Prasad Poudel, Executive Director of BFIs Regulation Department and Spokesperson of NRB.