Eleven months after it introduced base rate for commercial banks , the Nepal Rastra Bank (NRB) has made it mandatory for national-scale development banks and finance companies as well to comply with the provision.
The central bank on Tuesday issued a directive, asking development banks and finance companies to compulsorily make public the base rates while publishing financial reports from mid-January 2014. Base rate is the combined cost of banks that they should consider before lending. “This is a continuation to the monitory policy. After implementing it in commercial banks , we are now making it mandatory for national-scale development banks and financial institutions,” said Bhaskar Mani Gnawali, spokesperson for NRB.
According to Gnawali, implementation of base rate will bring transparency in rates being offered by financial institutions, which will benefit customers as they can bargain with banks on interest rates.
Gnawali said implementation of this directive will also make financial institutions competitive as they will have to increase their capital base. “Those institutions which cannot be competitive will have higher base rates. So this will help make financial institutions competitive,” Gnawali said. Once the base rate comes into the implementation, development banks and finance companies will have to fix a minimum interest rate. Normally, banks come up with a nominal interest rate by adding all its profits after deducting operational cost. The provision of base rate announcement will help general public to find out the institution with cheap interest rate and transact accordingly.
source:the kathmandu post,17 Sept 2013
The central bank on Tuesday issued a directive, asking development banks and finance companies to compulsorily make public the base rates while publishing financial reports from mid-January 2014. Base rate is the combined cost of banks that they should consider before lending. “This is a continuation to the monitory policy. After implementing it in commercial banks , we are now making it mandatory for national-scale development banks and financial institutions,” said Bhaskar Mani Gnawali, spokesperson for NRB.
According to Gnawali, implementation of base rate will bring transparency in rates being offered by financial institutions, which will benefit customers as they can bargain with banks on interest rates.
Gnawali said implementation of this directive will also make financial institutions competitive as they will have to increase their capital base. “Those institutions which cannot be competitive will have higher base rates. So this will help make financial institutions competitive,” Gnawali said. Once the base rate comes into the implementation, development banks and finance companies will have to fix a minimum interest rate. Normally, banks come up with a nominal interest rate by adding all its profits after deducting operational cost. The provision of base rate announcement will help general public to find out the institution with cheap interest rate and transact accordingly.
source:the kathmandu post,17 Sept 2013
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