Banks Charging High Interest Citing Liquidity Crisis

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Banks Charging High Interest Citing Liquidity Crisis

November 28: Businessmen have accused commercial banks of charging high interest rates under the pretext of lack of investable funds. Subodh Kumar Gupta, president of Birgunj Chamber of Commerce and Industry, said that although the base rate and premium rate applicable for the loan were specified when the loan agreement was signed between the bank and the borrower, the banks are now increasing those rates arbitrarily on the pretext of lack of liquidity.

Entrepreneurs claim that the regulatory body, Nepal Rastra Bank, has become a mere spectator towards the malpractice of the banks. According to Anil Agarwal, senior vice president of the chamber, even though NRB has instructed the banks to refund the amount charged by the banks due to the increased premiums, most of the banks have not complied with the NRB instruction.

He said that the NRB has not taken any effective action on such banks.

Agarwal stated, “The base rate of banks is reviewed every three months. The premium rate remains the same for the duration of the contract. Banks have increased the premium in an unfair manner.”

Traders say that the ultimate burden of such move of the banks fall upon the consumers.  Officials of NRB said that even with the borrowers’ consent, the premium cannot be increased throughout the contract period, but it has not been followed by the banks. NRB has instructed banks to return any additional sum acquired in such manner. The businessman says that NRB seems reluctant to take action against the banks for not following its instructions.

According to Madhav Rajpal, vice president of the association, the banks increased the premium rate by 3 to 4 percentage points by putting undue pressure on the borrowers. He informed that the base rate on the new loan has also been increased by the same amount.

The importers too complained that service charges, loan renewal charges as well as LC charges have been increased arbitrarily, holding lack of liquidity responsible.

Rajpal also informed that the chamber has written a letter to NRB about such malpractice of the banks. Businessmen say that the interest rate on loans taken in the past at 7/8 percent has now been increased to 16/17 percent. As a result, the competitiveness of business and production has decreased.





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