After repeated complaints from the customers, the central bank has restricted bank and financial institutions (BFIs) from arbitrary charging service, administrative and other fees.
Issuing a circular, the central bank also told BFIs that the difference of administrative service charge, prepayment penalty and commitment fee between clients while floating loans of same type should not be more than 0.25 percentage point.
The new consumer protection move against the BFIs’ that are charging their clients exorbitant fee under various headings will end discrepancy in various fees that BFIs charge, the cntral bank circular reads, adding that the fees, except administrative service charge, prepayment penalty and commitment fee that a BFIs levy on borrower, must be adjusted in the interest rate. “The central bank has also barred BFIs from collecting any prepayment penalty while repaying loans in advance from their clients with loan limit of Rs 5 million.”
The move will give some respite for the borrowers, who want to repay their loans before the schedule. Currently, the BFIs collect up to 2 per cent of penalty from borrowers, who repay loans before the predetermined schedule. “If a borrower wants to repay loans higher than Rs 5 million, including project-based financing, because of the changes in interest rates or conditions agreed during the loan disbursement, the bank will not be allowed to charge the prepayment penalty,” the circular reads.
Likewise, the BFIs can levy commitment fee, only if the borrower utilizes less than 60 per cent of sanctioned loans annually, the circular further reads, adding that the BFIs will not be allowed to collect any hidden fee from borrowers.
The central bank has also asked to complain, if any BFI imposes any charge higher than what has been prescribed. “The clients can file complaints at the Nepal Rastra Bank (NRB), and the central bank will help get refund of such charges, apart from charging the BFIs fine and taking other actions.”
Issuing a circular, the central bank also told BFIs that the difference of administrative service charge, prepayment penalty and commitment fee between clients while floating loans of same type should not be more than 0.25 percentage point.
The new consumer protection move against the BFIs’ that are charging their clients exorbitant fee under various headings will end discrepancy in various fees that BFIs charge, the cntral bank circular reads, adding that the fees, except administrative service charge, prepayment penalty and commitment fee that a BFIs levy on borrower, must be adjusted in the interest rate. “The central bank has also barred BFIs from collecting any prepayment penalty while repaying loans in advance from their clients with loan limit of Rs 5 million.”
The move will give some respite for the borrowers, who want to repay their loans before the schedule. Currently, the BFIs collect up to 2 per cent of penalty from borrowers, who repay loans before the predetermined schedule. “If a borrower wants to repay loans higher than Rs 5 million, including project-based financing, because of the changes in interest rates or conditions agreed during the loan disbursement, the bank will not be allowed to charge the prepayment penalty,” the circular reads.
Likewise, the BFIs can levy commitment fee, only if the borrower utilizes less than 60 per cent of sanctioned loans annually, the circular further reads, adding that the BFIs will not be allowed to collect any hidden fee from borrowers.
The central bank has also asked to complain, if any BFI imposes any charge higher than what has been prescribed. “The clients can file complaints at the Nepal Rastra Bank (NRB), and the central bank will help get refund of such charges, apart from charging the BFIs fine and taking other actions.”
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