BFIs need to change interests rate each month- NRB

KATHMANDU: As of right now, banks and financial institutions will modify loan interest rates on a monthly basis. The interest rate on loans must change each month, according to instructions given by the Nepal Rastra Bank to banks and financial institutions (BFIs) of categories A, B, and C.

The central bank has made arrangements for the loan interest rate to fluctuate each month in accordance with the base rate of the previous three months. According to the NRB’s guidelines, the interest rate on a loan may be changed monthly up to the maximum allowed by an increase or decrease in the average base rate over the previous three months. Previously, it had been planned for the loan’s interest rate to change only every quarter.

This implies that banks will now modify loan interest rates throughout the month of May. The central bank has instructed that the loan interest rate must also be adjusted in May to reflect changes in the average base rate for the months of February, March, and April.

Previously, the loan interest rate would only be changed every three months, in July, in accordance with the rule. Aadhaar rates are decreasing along with the interest rates that banks are giving their depositors.

Additionally, it is allowed for the interest rate to be decreased by an amount greater than the variation in the average base rate over the previous three months.

According to the central bank, under no circumstances will this clause prevent the interest rate from rising and will maintain the borrower and lender-agreed-upon stable interest rate.

However, there is also a chance that the interest rate could rise each month as long as the Aadhaar rate is rising. Those who took out loans with fixed interest rates will not be covered by this arrangement.