The Central Bank has released new guidelines to improve the transparency and customer-friendliness of the banking system; the limit on margin loans has not been changed.
As a result of the new rule, banks and financial institutions are no longer authorized to send out random warnings to debtors who have not paid their loans.
Under the new laws, banks and financial institutions will only be able to issue a public notice for loan recovery after six months of non-recovery. By releasing a unified guideline to all financial institutions, the central bank reached an agreement with BFIs today. Between the time of the loan’s initial disbursement and the time of the public notice and collateral auction proceedings, at least six months should have transpired in order to recover a loan that has been in circulation for more than one year.
The Nepal Rastra Bank has also asked banks and financial institutions to publish their earnings per share on their websites in accordance with the new standards. Banks and financial organizations will now be forced to publish their yearly earnings per share data.
Financial institutions (BFIs) must additionally keep a reserve fund equal to 20% of the amount accounted for in the ‘Statement of Other Comprehensive Income,’ according to the National Reserve Bank. At that point, just the remaining 80% of the product will be accessible for distribution.
A clause has also been included that prevents a shareholder or representative from voting during any discussion in the general meeting about the accountability of work they have done, missed, done incorrectly, or done out of self-interest.
The requirements for opening extension counters have been strengthened by the National Retail Federation. For the development of extension counters in the Kathmandu Valley and Kathmandu Metropolitan City, the Nepal Rastra Bank’s (NRB) authorisation is required. In addition, in conjunction with the establishment of a liaison office, the central bank has placed further restrictions. The central bank does not have to approve the creation of liaison offices in Karnali and the Far Western Provinces. In the remaining states, the National Research Board’s clearance will be necessary. Liaison offices will also be prohibited from accepting deposits or disbursing loans to customers.
According to the legislation, no loan of any sort will be provided at a rate lower than the base rate. Previously, the interest rate on poor-credit loans was lower than the Federal Reserve’s base rate.
Banks and financial institutions can now close accounts with zero balances that have been dormant for more than 10 years by making a public notice on their website as a result of the new rule.
In addition, the NRB’s new directive provides relief in the area of bond issuance. If a bond is issued in such a way that it contributes to resource mobilization, there will be no need to deposit money into the payment fund in the future. It had to be deposited in a proportional manner previously. The National Reserve Bank has allowed microfinance institutions’ bonds to be treated as if they were low-quality loans.
The difference in interest rates on different types of savings accounts cannot be more than 2 percentage points in either direction, according to the new rule. Furthermore, no bank or financial institution will be allowed to send presents to consumers in order to increase deposit collection or develop the business. Banking and financial institutions have been offering various incentives to consumers in an attempt to increase deposits at a time when the banking system’s liquidity has been weak in recent years. Doing so is now against the law. As a result, BFIs will be prohibited from running any form of gift, lottery, competition, or prize program.
In a similar spirit, banks and financial institutions will not be allowed to give any form of financial services to customers unless they specifically request it. If a service fee is charged without the customer’s permission, an additional ten percent of the fee must be credited to the customer’s credit card account. This clause is expected to put an end to banks’ and financial institutions’ erroneous practice of charging fees under a variety of titles.