Life insurers cut interest rate amid lowered rate of interest by BFIs

Kathmandu: Life insurance companies have slashed the interest rate against policy loans. The life insurers have lowered the interest rate for the loan issued against the collateral of life insurance policies.

According to the published interest rate of life insurers, the revised interest rate ranges from 10 to 11 percent per annum. The interest will be compounded semi-annually if unpaid by the policyholders. Life insurers are forced to lower the interest rate amid a decline in the interest rate offered by banks and financial institutions. The interest rate on term deposits offered by the BFIs ranges from 7 to 9.99 percent.

Nepal Life Insurance, Suryajyoti Life Insurance, National Life Insurance, and LIC Nepal have revised and slashed their policy interest rate.

The life insurers had increased the interest rate following the high-interest rates offered by the BFIs for term deposits. Such a move was taken by the life insurers to discourage policyholders to take loans and enjoy interest rate margins between policy loans and BFIs term deposits. The life insurers had claimed that the policyholders used the funds from policy loans to earn high interest on term deposits.

Life insurers have disbursed policy loans above NPR 80 billion during last financial year 2079-80.

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