The Nepal Rastra Bank (NRB) has directed the bank and financial institutions not to overcharge service recipients/ clients while lending loans.
The central bank has received complaints that clients are being charged under different headings such as administrative service fees, payment in advance and commitment fees and so on while issuing loans.Business community have complained that they are being charged up to 1.5 per cent service charge while taking loan from banks and finances.
In a recent programme organised by the NRB to collect feedback in regard with the monetary policy, the business community drew the attention of the governor to the matter. The NRB has directed banks and finances not to charge borrowers under several headings, making it clear that service charge should not exceed 0.25 per cent of the total loan.
According to NRB officiating executive director Bam Bahadur Mishra, loan providers are not allowed to charge service recipients in the ATM and other cards use, assessment of securities and insurance fees more than charge fixed by service providers. Similarly, banks and financial institutions are not allowed to charge clients under any heading in the electronic check clearing of below 200 thousands.
They can however take administrative service charge while initiating a process for the approval of loan after the client applied for the loan. If the loan is refused, the amount charged as the administration service fees shall be refunded. The central bank’s directive states that in the case of periodic loans, commitment fee could be taken for only one time on the amount that is least used than the limit of the approved loan.
Similarly, advance payment fee would not be charged while paying any kind of loans with the threshold up to Rs 5 million. In the case of the loans more than this threshold, no fee can be charged for advance loan payment if a client wanted to pay the loan in advance owing to the conditions stipulated while taking loans and due to the addition or change of interest rate.
Similarly, in the case of project loan the banks cannot unilaterally add or change the rate of interest and other terms and conditions stipulated in the agreement with the borrower without the latter’s agreement. If the borrower wanted to pay the loan in advance due to such provision, the lender cannot take any type of fee for the advance payment.
The banks and financial institutions taking permission from the Central Bank are required to issue loans in the priority sectors within the stipulated threshold of their total loan. Such loan has to be issued in the agriculture, tourism, energy among the priority sectors until the end of the current fiscal year. The ‘A’ class banks are required to issue 10 percent loans in agriculture sector and 15 per cent loans in the tourism sector.
Likewise, the Central Bank has urged the lenders to take from the borrowers concerned only the amount except the subsidized interest while realizing the interest on the subsidy loans issued as per the Integrated Procedures Related to Interest Grants for Concessional Loans, 2075 and the subsidized loans issued to the earthquake victims for construction of houses and shelters.