Interest Rate On Loans From Microfinance Fixed At Maximum 15 Percent

October 5, 2020 | Investopaper

According to the Unified Directive 2077 issued by Nepal Rastra Bank to the licensed ‘D’  class microfinance institutions on Sunday, the microfinance financial institutions have to maintain a fixed interest rate. This has reduced the fear of interest rate change when taking a loan from a microfinance institution. As per the directive, microfinance companies cannot charge more than 15 percent interest on loans. This provision directed by NRB is going to benefit the borrowers who are in fear of changing interest rate.

Also, microfinance institutions have to fix the base rate from Karthik. The directive states that microfinance financial institutions have to fix the base rate and submit it to the Nepal Rastra Bank from Karthik.

NRB has stated that the new interest rate directive will be applicable to the loans disbursed after Shrawan 13, 2077.

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There is a provision to increase the published interest rate on deposits up to 0.5 percentage point and in case of loan interest rate, it is not allowed to maintain higher rate than the published interest rate. Similarly, microfinance financial institutions are not allowed to take any amount related to the loan except administrative service fee, interest and compensation interest.

As mentioned in the directive, Dalit, Free Labourer, Badi, Haliya, Conflict Victims, Single Women, Disabled and Senior Citizens will have to be given concession by 1 percentage point in the interest rate on loans taken from microfinance institutions.

Earlier, the Department of Cooperatives has set a limit of not allowing the cooperatives to charge more than 16 percent interest rate on loans and investments.

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