Kathmandu. Nepal Rastra Bank (NRB) has introduced new and stringent rules for hire purchase companies. The policy and procedural provision (Sixth Amendment) issued by the Rastra Bank to approve the company issuing hire purchase loans has now opened the way to protect the general public from financial exploitation and make the installment service transparent.
Many borrowers have always been troubled by the high service charges levied while approving loans, unexpected penalties for late installments, and arbitrary change of interest rates. The Nepal Rastra Bank (NRB) has issued an amendment to the general public addressing the concerns and grievances of the general public.
According to the revised guidelines, now there will be a complete stop to the arbitrary interest rates that the hire purchase company has been charging from the consumers. Hire purchase companies set and raised interest rates on their own. Now, companies will have to set interest rates transparently based on the cost of funds.
The interest will not be charged at a premium of more than 2 percentage points over the interest rate paid to the Nepal Rastra Bank. This will give the customer a clear estimate of the interest they will have to pay beforehand.
Sometimes, due to a recession in business or household problems, the high late fees due to not being able to pay the installments on time used to scratch the back of the borrower. According to the new rules, companies will not be able to charge more than 2 percent penalty interest per annum even if the installment is exceeded. More importantly, the penalty can only be calculated on the principal amount that has been exceeded, there is a complete ban on the recovery of chakravarti by adding interest on the penalty.
Large sums of money used in the name of paperwork related to the approval of loans have also been banned. Hire purchase companies will be allowed to charge a maximum of 1 percent service charge while approving loans from customers. Even if the service has to be obtained from an outside agency, it will not be allowed to charge more than the actual cost.
Some hire-purchase companies kept customers in a limited circle by financing only certain cars or home appliances of a certain brand of home appliances. Now, companies will have to invest in multi-brands, i.e. vehicles of more than one company or household appliances. This will allow the customer to buy any brand of vehicle or appliance that suits them easily.
PAN card is no longer mandatory for small and general public to take loans up to Rs 25 lakh for household or business purposes. This has freed small borrowers from the hassle of visiting tax offices and collecting documents.
