Kathmandu. Banks have to set a set standard while determining the interest rate of the loan provided to the customer.
Banks and financial institutions have to determine the interest rate of the loan in accordance with the rules of Nepal Rastra Bank. The interest rate of loans provided by banks can be fixed or variable. The fixed interest rate does not increase for a specified period of time, while the variable interest rate fluctuates according to the change in the base rate of the institution.
According to a notice issued by the Nepal Rastra Bank (NRB) today, the banks and financial institutions (BFIs) may fix the interest rate by adding premium to their base rate while providing loans at variable interest rates. “Such premium should be determined by assessing the risk of the borrower,” the notice reads, “Once the premium rate is fixed and the loan is approved by mentioning the loan proposal letter to the borrower, the plan cannot be implemented to increase the premium rate or increase it automatically by providing any kind of discount.” ’
NRB has stated that customers taking loans at variable interest rates should be clear about the base rate and premium rate of the loan while taking the loan proposal letter. “After that, all the information about the change in the interest rate due to the change in the base rate and the date from which it will be implemented should be clarified from the concerned lending institution,” the central bank said.
