NRB instructs banks to minimise debt servicing fees

Kathmandu, April 13

Nepal Rastra Bank (NRB) has instructed all the licensed banks and financial institutions (BFIs) to reduce the service charges and commitment fees sought from clients while servicing loans.

Issuing a circular, the central regulatory and monetary authority has barred BFIs from taking any charges from the

clients if the loan is not approved.

“Any type of service fees that are charged by BFIs for loan negotiation with clients should be returned to the client’s account if the loan is not sanctioned,” read the circular.

It is reported that BFIs have been rampantly charging fees during the loan negotiation process, which goes towards the income of the BFIs whether or not the loan is approved.

NRB has also directed the BFIs to obtain the commitment fees on utilisation of working capital loan strictly based on agreement signed between the concerned financial institution and borrower.

The central bank, however, has allowed BFIs to obtain the commitment fees as per the agreement if the borrower fails to utilise minimum average of the given lending limit as working capital. But such fees cannot be charged in advance and it should be charged only once after the given period to utilise the loan has lapsed.

The central bank has also told BFIs that the debt servicing and commitment fees should not vary by over 0.25 percentage point between clients availing similar kind of loan facility.

Narayan Prasad Paudel, executive director and spokesperson for NRB, said that the central bank has taken this step to end the favourable treatment given to the near and dear ones of banks’ promoters and high-level management officials.