Kathmandu. Nepal Rastra Bank (NRB) has made a new provision in the interest rate on loans given by microfinance institutions. The central bank has implemented the provision brought by the central bank through the third quarter review of the monetary policy of the current fiscal year.
Now microfinance institutions will have to calculate the base rate while determining the interest rate on loans. This provision has been added by the Rastra Bank by amending the unified directive issued for microfinance institutions.
According to the revised directive, the microfinance institutions will now have to fix the interest rate on loans to be disbursed from July 1. Microfinance institutions will have to fix the interest rate on loans from their customers quarterly by adding a maximum of 3 percentage points to their base rate.
While determining the interest rate in this way, the microfinance institutions will have to determine the premium by adding a premium to their published average base rate for the last three months. Notwithstanding anything contained in the directive, microfinance institutions will not be allowed to determine the interest rate on loans higher than the rate of interest incurred by adding 9 percentage points to the latest monthly average base rate of commercial banks as mentioned in the ‘Current Economic and Financial Situation of the Country’ published by the Rastra Bank.
Thus, microfinance institutions will have to determine the interest rate to be taken from their customers within the range of interest rate whichever is lower than the interest rate whichever is lower than the interest rate that will be reduced by adding a maximum of 3 percentage points to their base rate and 9 percentage points to the latest monthly average base rate of commercial banks as mentioned in the current economic and financial situation of the country published by this bank.
For example, the average base rate of commercial banks for the last published month i.e. june 2082 is 6.09 percent, while microfinance institutions will not be able to determine the interest rate of loans beyond 15.09 percent if they add 9 percentage points to 6.09 percent. However, if the microfinance institution is in point no. (b) If a maximum of 3 percentage points premium is added to its base rate, the interest rate on the loan is fixed at 16 percent and the rate of 9 percentage points added to the latest monthly average base rate of commercial banks published by the Nepal Rastra Bank is 15.09 percent, in this case, the microfinance institution will not be able to determine the interest rate of the loan to be more than 15.09 percent.
As per the revised guidelines, microfinance institutions can fix a maximum of 15 per cent interest rate from their customers in case of loans disbursed before July 1, 2018 and are currently outstanding.
