First Business News Portal in English from Nepal
KATHMANDU: Nepal Rastra Bank has instructed the microfinance companies to reimburse the borrowers for any service fees that were improperly collected. This directive has also been delivered to microfinance institutions by the central bank, which is requesting that other banks and financial organizations repay the interest that was paid in violation of the laws.
According to a Rastra Bank source, “When we came to obtain authorization for the Annual General Meeting of the last fiscal year, we urged them to restore the service fee levied against the regulations.” said the source. Since they were only allowed to attend after returning the service fees that had been illegally taken, until Monday none of the groups had been granted permission to hold the annual general meeting. The source stated, “Preliminary files have received for approval. We have requested that they be changed (to return the overpriced service cost).”
The central bank has established a cap on the service fee that consumers can be charged by financial institutions that provide microloans. When it was discovered that the interest rate was higher than the permitted limit, the central bank asked some institutions to return the interest that had been charged in violation of the regulations. These institutions were asked to renew the loans provided for one year up to two thirds of the times during that time. According to Rastra Bank’s guidelines, microfinance financial institutions are not permitted to charge their clients any form of service fee for maintaining savings or deposit accounts.
The organization has the right to impose a service fee of up to 1.50 percent on the approved loan upon loan disbursement. They are only permitted to impose a service fee that is proportional to the rate based on the loan length and does not exceed 1.50 percent annually for loans that are provided for a period of less than a year. For loans, a service fee of no more than 0.50 percent may be assessed.
Rastra Bank has received a complaint, alleging that the microfinance institution levied a service fee of up to 6%. Vice President of the Microfinance Bankers Association Min Bahadur Bohara said that Rastra Bank has provided instructions to repay any excess service costs that were accrued during the previous fiscal year.
The Microfinance Bankers Association and Rastra Bank are currently in conversation regarding the type of amount that should be refunded. Although several banks allegedly increased their service prices in the previous fiscal year, he asserted that they did not do so this year. Currently, 65 microfinance financial institutions are active nationwide.
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