Nepal Rastra Bank (NRB) has rolled out a fresh regulation governing interest rates on loans offered by microfinance institutions, effective from Shrawan 1. According to the updated guidelines, microfinance institutions are permitted to establish loan interest rates by adding a maximum premium of 3 percentage points above their base rate.
In line with the new provisions, microfinance institutions are required to set interest rates on a quarterly basis, determined by the average base rate from the preceding three months. Additionally, during loan disbursement, the interest rate must not surpass the rate achieved by adding 9 percentage points to the most recent monthly average base rate of commercial banks.
For loans issued prior to Shrawan 1, a maximum interest rate of up to 15% has been sanctioned. Institutions are also obliged to compute and submit their monthly base rate to NRB within 15 days and make it available on their official website.
Borrowers now have the flexibility to select between fixed or variable interest rates at the moment of borrowing. In the case of variable rates, any adjustments must stay within the fluctuation range of the last three months’ average base rate.
