Issuing a Unified Directive 2077, the central bank directed BFIs to keep consistent interest rates on personal term loans with a repayment period of more than one year.
Earlier, borrowers complained that although they took loans in low-interest rate, BFIs would raise the interest rate within a few months.
As per NRB, the licensed institution must fix a fixed interest rate for each personal term loan having a repayment period of more than one year. The interest rate must not change throughout the repayment period.
However, under the changed mechanism, if a borrower wants to take a loan at a variable interest rate that changes with the base rate of the licensed institution, BFIs are allowed to issue loans under such a setting as well.
This provision is applicable to the past/ future personal loans such as home loan, auto loan and other any types of loan which is repayable in monthly or any periodical installment and has more than one year repayment period.
Before this, the terms and conditions of the personal loan should be changed at the request of the customer in the case of term loans such as home loan, auto loan and others that are payable in monthly/quarterly/periodical installments.
NRB stated that the change in the terms and conditions or payment schedule or installment amount in order to comply with the provision will not be considered as rescheduling or restructuring.
Moreover, NRB said that the fixed interest rate set for the new personal loans that would not change within the repayment period should be fixed and published semi-annually.
