BFIs not eager to execute Supreme Court’s verdict

Kathmandu, April 1

Banks and financial institutions (BFIs) have been showing unwillingness to execute the verdict of the Supreme Court on frequent revision of interest rates in credit citing they have been revising the rates based on the conditions signed by the clients while obtaining loans from the banks.

Though Nepal Rastra Bank (NRB) — the central regulatory and monetary authority — had issued a circular to implement the apex court’s verdict, BFIs have been revising interest rates in credit frequently and interpreting the court’s decision in their own interests.

“We have not revised interest rates without consent of our clients, which they signed while obtaining loans,” one prominent banker told The Himalayan Times. “We have revised the interest rates as per the given conditions in the loan agreement, so it is legal and valid.”

The apex court had issued a verdict barring BFIs from revising interest rates in a frequent manner. Following the verdict of the court, NRB had also asked BFIs to stick with the same interest rates that was fixed when the loans were floated to the respective borrowers.

“However, our grievances hearing unit continues to receive a lot of complaints about the commercial banks revising the interest rates on loans as per their wish,” said Chinta Mani Siwakoti, deputy governor of the NRB. “The central bank has already urged the BFIs to execute the Supreme Court’s verdict in a proper manner.”

The Supreme Court’s verdict not only barred BFIs from frequent revision of interest rates but also directed them to make fair value calculation of the property taken as collateral from the borrowers against the loan amount and auction the collateral, in case of default, according to the prevalent market rates.

Based on the apex court’s verdict, the central bank had issued a circular to the BFIs to determine the loan amount and auction the collateral as per the prevalent market rates.

NRB Deputy Governor Siwakoti said that the central bank is committed to execute the apex court’s verdict and take action against the BFIs that are ignoring the given instructions.

Agro loans at 5pc interest rate

KATHMANDU: Interest rate of agro loans will not exceed five per cent as the Nepal Rastra Bank has issued a circular to the commercial banks, development banks and finance companies to execute the amended guidelines of ‘Interest Subsidy for Commercial Agriculture Loans to the Youth Programme’.

The government has capped five per cent interest rate for the agro loans issued under this programme and the banks and financial institutions cannot charge more than five per cent from the borrowers apart from the government’s interest rate subsidy of five per cent.

Earlier, the government had been providing subsidy of four per cent under this scheme since the programme was implemented in March 2015.