NRB prepares to rein in interest rates on loans charged by microfinance
ShareSansar, February 23:
Nepal Rastra Bank has decided to put limitations on interest rates microfinances can charge on loans. After receiving complaints about the high rate of interest charged by microfinances, NRB has decided to set a limitation to it.
As per the news published in the today's edition of Nagarik Daily, NRB will soon give instructions about lowering the loan interest rates to microfinances. According to a source, NRB has decided to issue instructions related to it before the end of the tenure of Governor Yuvraj Khatiwada. NRB is expected to set the interest rate in the region of 20%.
Governor Khatiwada, during half yearly review of monetary policy, had said microfinances are providing high returns largely due to the high interest rates they charge on loans. He had pointed out that the poor people were not ready for loans at a rate of more than 20%. He had recommended that micro finances bring improvement themselves or else the NRB would be compelled to set limitations.
Meanwhile, Nepal Microfinance Bankers Association has hinted that it would oppose any such limitations as their management expenses are high. The chairman of Nepal Microfinance Bankers Association, Dharma Raj Pandey, has said that the association has already instituted a self regulation committee to study the issue of loan rates. The report prepared by the committee will be discussed with the NRB officials, Pandey said.
The central Bank had conducted a study about the loan rates and services provided by the micro finances. The study had concluded that only a limited number of people have benefitted from the loans provided by micro finance institutions and that the economic conditions of underprivileged people have not improved.
Commercial banks have lessened the loan rates because of the high liquidity so; the NRB has put pressure on the Micro Finances to follow suit. Another reason for the pressure from the central bank is that high loan rates have a negative effect on the debtor.
