Nepal Rastra Bank Enforces Stricter Provisions for Hire Purchase Companies

12th August 2026, Kathmandu

Nepal Rastra Bank has introduced revised and stricter regulatory provisions governing hire purchase companies.

NRB Enforces Stricter Provisions

The Policy and Procedural Provisions for Granting Approval to Companies Providing Hire Purchase Loans Sixth Amendment aims to protect consumers from financial exploitation and enhance transparency across hire purchase services.

The central bank enacted these amendments to address longstanding borrower grievances regarding arbitrary interest rate adjustments, high loan approval service fees, and steep late payment penalties.

Transparent Interest Rate Determination and Cap on Adjustment

Under the newly enforced provisions, hire purchase companies are prohibited from setting arbitrary interest rates.

Companies must determine interest rates in a transparent manner based on their internal cost of funds.

Furthermore, hire purchase companies cannot levy an interest rate carrying a premium or adjustment that exceeds 2 percentage points from the rate officially submitted to and published by Nepal Rastra Bank.

This measure enables prospective borrowers to clearly understand their interest obligations in advance.

Capping Penal Interest at 2 Percent per Annum

To provide relief to borrowers facing temporary business slowdowns or household financial difficulties, late payment fees have been strictly capped.

Hire purchase companies are not permitted to charge penal interest exceeding 2 percent per annum on overdue installments.

Additionally, penal interest must be calculated exclusively on the overdue principal balance.

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Companies are explicitly prohibited from levying additional interest on the penalty itself, eliminating the practice of compound recovery on penal interest.

Service Charges Capped at 1 Percent

The central bank has placed strict limits on loan processing expenses incurred during approval procedures.

Hire purchase companies can charge a maximum service fee of 1 percent upon loan sanctioning.

In cases where third party or external agency services are required during processing, companies are forbidden from charging borrowers any amount above the actual cost incurred.

Mandatory Multi Brand Financing Mandate

To prevent restrictive financing practices, the revised framework enforces multi brand financing across hire purchase institutions.

Previously, certain hire purchase companies restricted financing options to specific vehicle or appliance brands.

Companies are now required to provide financing options for vehicles and household equipment across multiple brands and manufacturers, offering consumers greater selection freedom.

Exemption of Permanent Account Number for Small Loans

The amended provisions simplify documentation procedures for retail consumers and small business operators.

A Permanent Account Number is no longer mandatory for obtaining household or commercial hire purchase loans up to 2.5 million Rupees.

This waiver reduces administrative burdens for small borrowers by eliminating the requirement to obtain a tax identification card or make repeated visits to tax offices for smaller financing requests.

For More: NRB Enforces Stricter Provisions