Development banks, finance companies must fix their base rates:NRB

ShareSansar, Sept 17:

The Nepal Rastra Bank has told all national-level development banks and finance companies to publicize their base rate from now onward.

According to a circular issued by the central bank on Monday, all “B” and “C” class development banks and financial institutions must include their base rate while publicizing their financial report from the end of Poush (mid-January).

Now these BFIs must publicize their base rate while making their financial report public at the end of each quarter.

What it means for the customers is that the BFIs will have to fix its minimum interest rate on lending, which is calculated by adding up its profit after deducting all its costs.

Smaller BFIs have been opposed to the idea of fixing the base rate, stating that they cannot complete with the bigger ones -- which can afford to collect deposits on low interest rates.

As the smaller BFIs cannot attract deposit on low interest rates, their interest on deposit and the interest on investment are usually much higher than the commercial banks.

The new NRB guideline also states that the “B” and “C” class development banks and finance companies must update their base rate every month and post it on their website,.

In the last fiscal year, the central bank had directed all the commercial banks to make their base rate public from mid-January.

As the new guideline, the NRB has stated that all national level “B” and “C” class development banks and financial institutions must fix their base rate in line with the guideline issued for the commercial banks.

Now these BFIs must fix their interest rates on both borrowing and lending in tune with their base rate.

“We have started the exercise of fixing the base rate for the BFIs to make their investment disciplined and transparent,” central bank director Bhaskar Mani Gyawali said.

He also informed that the base rate will be mandatorily enforced in days ahead.