KATHMANDU, JUNE 4, 2012
The central bank has forbidden financial institutions from levying any extra charge on advance repayment of loans.
Issuing a circular today, Nepal Rastra Bank (NRB) has directed financial institutions to allow repayment of loans at the existing rate of interest in case the borrower wants to repay the outstanding dues following an interest hike.
“This provision will provide the borrower a chance to discontinue borrowing and repay the loan instead of paying a higher interest rate,” said spokesperson of NRB Bhaskar Mani Gyanwali. The borrower does not have to pay anything more than the outstanding dues and principal amount based on the earlier agreed upon interest rate.
Likewise, in its latest attempt to encourage agro lending, NRB has decided to calculate lending of up to Rs 10 million to non-credit and saving cooperatives as deprived sector lending. Loans of up to Rs 10 million floated to cooperatives who in turn lend to a group involved in agriculture, cattle rearing or poultry farming with a limit of up to Rs 90,000 per person will be eligible to be considered under this provision.
“We hope this will help encourage financial institutions to float loans to agro and farming through such co-operatives,” added Gyanwali. However, if such loans are found to be used for other purposes then the financial institution has to provision 150 per cent of the lent amount for possible loan loss, said the circular.
In order to promote small microfinance institutions and thus direct lendings to the deprived sector and ease the pain of looking for borrowers in remote areas by financial institutions, the central bank had also allowed the purchase of ordinary shares of microfinance institutions as deprived sector lending.
Deprived sector lending refers to small loans that are lent to the poor and rural people for small projects with a minimal collateral in order to promote formal banking in the rural areas.
According to the monetary policy, commercial banks have to lend 3.5 per cent of their total loans to the deprived sector while development banks and finance companies must lend 3 per cent and 2.5 per cent of their total loans respectively to the deprived sector, according to the monetary policy.
Likewise, NRB has directed financial institutions to consider those loans floated for only one year as term loans and even those loans floated by microfinance institutions that are meant to be paid within one year through installments are also be taken as term loans.
Source: THT
The central bank has forbidden financial institutions from levying any extra charge on advance repayment of loans.
Issuing a circular today, Nepal Rastra Bank (NRB) has directed financial institutions to allow repayment of loans at the existing rate of interest in case the borrower wants to repay the outstanding dues following an interest hike.
“This provision will provide the borrower a chance to discontinue borrowing and repay the loan instead of paying a higher interest rate,” said spokesperson of NRB Bhaskar Mani Gyanwali. The borrower does not have to pay anything more than the outstanding dues and principal amount based on the earlier agreed upon interest rate.
Likewise, in its latest attempt to encourage agro lending, NRB has decided to calculate lending of up to Rs 10 million to non-credit and saving cooperatives as deprived sector lending. Loans of up to Rs 10 million floated to cooperatives who in turn lend to a group involved in agriculture, cattle rearing or poultry farming with a limit of up to Rs 90,000 per person will be eligible to be considered under this provision.
“We hope this will help encourage financial institutions to float loans to agro and farming through such co-operatives,” added Gyanwali. However, if such loans are found to be used for other purposes then the financial institution has to provision 150 per cent of the lent amount for possible loan loss, said the circular.
In order to promote small microfinance institutions and thus direct lendings to the deprived sector and ease the pain of looking for borrowers in remote areas by financial institutions, the central bank had also allowed the purchase of ordinary shares of microfinance institutions as deprived sector lending.
Deprived sector lending refers to small loans that are lent to the poor and rural people for small projects with a minimal collateral in order to promote formal banking in the rural areas.
According to the monetary policy, commercial banks have to lend 3.5 per cent of their total loans to the deprived sector while development banks and finance companies must lend 3 per cent and 2.5 per cent of their total loans respectively to the deprived sector, according to the monetary policy.
Likewise, NRB has directed financial institutions to consider those loans floated for only one year as term loans and even those loans floated by microfinance institutions that are meant to be paid within one year through installments are also be taken as term loans.
Source: THT
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