NRB fixes ceiling of four percent premium on interest rate of hire purchase loan

Published On: January 31, 2022 07:15 AM NPT By: Republica  | @RepublicaNepal

KATHMANDU, Jan 31: Nepal Rastra Bank (NRB) has capped the premium amount on the interest rate of hire purchase loan being charged by the companies concerned from their customers.

Issuing a circular on Sunday, NRB has allowed the hire purchase companies to charge a premium interest rate of up to four percent on top of the prevailing average market rate from the buyers. Similarly, the central bank has maintained the provision that these companies can provide loan amounts only up to 80 percent of the valuation of assets.

Hire purchase is a non-banking finance company that enables businesses to purchase new assets on an installment plan. In Nepal, the companies providing this service have been facilitating their customers to purchase vehicles, machines and equipment, among others. In absence of restrictions, such companies have been charging interest rates rampantly from their customers.

NRB has maintained that the hire purchase companies should have a paid-up capital of Rs 300 million. They cannot issue loans of more than 30 percent of their net assets to a single borrower that includes an individual, a business firm or a group.


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