KATHMANDU, Dec 16: Banks and financial institutions (BFIs) have been barred from altering their interest rates on fixed-rate loans without receiving the consensus of the borrowers.
Issuing a revised unified directive on Thursday, Nepal Rastra Bank (NRB) has stated that the BFIs are permitted to revise the interest rate only in seven years from the date of loan issued. In the successive period, the interest rate can be revised every five years. “Apart from the prescribed periods, the lending interest rate cannot be changed in any circumstance,” reads the NRB directive.
Revised interest rate corridor system introduced
Similarly, NRB has also asked the BFIs to carry out the valuation of collateral assets of the borrowers on a par with the good practices and without any prejudice. The central bank has also directed the BFIs to formulate a necessary work plan to maintain the credit-deposit (CD) ratio within the prescribed limit by mid-July 2022.
NRB has maintained a CD ratio of 90 percent for the BFIs. Most of the BFIs, however, have breached the rule by lending excessive amounts to their borrowers, resulting in a massive liquidity crunch in the country’s banking system.
NRB in this regard has asked the BFIs to manage their deposit collection and loan flow on a monthly basis. The BFIs have also been asked to endorse their work plan on the CD ratio from their boards and submit it to the central bank before taking it into execution.
