Interest charge

Businesses providing hire-purchase loans are not allowed to charge service fees or processing fees

Businesses providing hire-purchase loans are not allowed to charge service fees or processing fees

Nepal Rastra Bank. (File photo)

KATHMANDU: The Nepal Rastra Bank (NRB) has put in place a provision under which companies providing hire-purchase loans will not be able to charge anything other than the interest rate.

NRB recently amended for the third time the 2013 Approved Policy and Procedural Framework — a set of guiding rules for companies providing hire-purchase loans.

Previously, companies offering installment loans charged between 0.75% and 3% service or processing fees.

With the recent amendment, businesses cannot levy any fees/charges except the fixed rate of interest. Likewise, these companies will also not be allowed to collect any kind of deposits.

Under the new arrangement, NRB can adjust the interest rates of these companies through political intervention if it deems it necessary.

Similarly, leasing companies will not be allowed to borrow more than 10 times their own assets and will have to disburse a loan up to a maximum of 80% of the collateral.

Companies that invest in installment loans will also not be able to grant any type of loan other than hire purchase and will not be able to carry out any other commercial activity.