July 24: The Nepal Rastra Bank (NRB) has directed the bank and financial institutions (BFIs) not to overcharge their clients while lending loans, according to Rastriya Samachar Samiti (RSS).
The state-owned news agency reported that the central bank received complaints that clients were being charged under different headings such as administrative service fees, payment in advance and commitment fees and so on while issuing loans.
The business community has complained that they are charged up to 1.5 per cent service charge while taking loan from banks and finances.
RSS said that the business community drew the attention of NRB governor regarding this issue in a recent programme organised by the central bank to collect feedback on its monetary policy.
Following this, the NRB directed BFIs not to charge borrowers under several headings, making it clear that service charge should not exceed 0.25 per cent of the total loan, RSS further said.
According to NRB officiating executive director Bam Bahadur Mishra, loan providers are not allowed to charge service recipients for the use of ATM and other cards, assessment of securities and insurance fees more than the charge fixed by the service providers.
Similarly, BFIs are not allowed to charge clients under any heading in the electronic check clearing of below Rs 200,000. They can however take administrative service charge while initiating a process for the approval of loan after the client applies for the loan. If the loan is refused, the amount charged as the administration service fees shall be refunded, RSS said.
The central bank's directive states that in the case of periodic loans, commitment fee could be taken for only one time on the amount that is least used than the limit of the approved loan. Similarly, advance payment fee would not be charged while paying any kind of loans with the threshold up to Rs 5 million. In the case of the loans more than this threshold, no fee can be charged for advance loan payment if a client wanted to pay the loan in advance owing to the conditions stipulated while taking loans and due to the addition or change of interest rate.
Similarly, in the case of project loan the banks cannot unilaterally add or change the rate of interest and other terms and conditions stipulated in the agreement with the borrower without the latter's agreement. If the borrower wanted to pay the loan in advance due to such provision, the lender cannot take any type of fee for the advance payment.