Nepal Rastra Bank (NRB) has introduced a new directive regulating interest rates on loans disbursed by microfinance institutions, effective from Shrawan 1. Under the revised guideline, microfinance institutions are allowed to set loan interest rates by adding a maximum premium of 3 percentage points above their base rate.
As per the new rules, microfinance institutions must determine interest rates quarterly based on the average base rate of the previous three months. Furthermore, while disbursing loans, the interest rate must not exceed the rate obtained by adding 9 percentage points to the latest monthly average base rate of commercial banks.
For loans disbursed before Shrawan 1, a maximum interest rate of up to 15% has been allowed. Institutions are also required to calculate and submit their monthly base rate to NRB within 15 days and publish it on their official website.
Borrowers will now have the option to choose between fixed or variable interest rates at the time of borrowing. In case of variable rates, any changes must remain within the fluctuation range of the last three months’ average base rate.
