One of Nepal’s biggest banks in terms of both capital and business, NIC Asia, has been found involved in unlawful practices to maximize profits.
The bank, which has earned a reputation for trying to unethically attract fixed deposits by offering sky-high interest rates, has even defied directives from the central bank.
The bank, which had hiked its interest rate on fixed deposits to 11.1 percent per annum last week, was forced to reduce it to under 10 percent following a directive from the Nepal Rastra Bank. However, it is found to have issued FDs at 11.1 percent by backdating the receipts for fixed deposits it received.
Following the ‘interest rate war’ between commercial banks, the central bank this week said that banks can only increase the interest rates on fixed deposits by up to 10 percent every month. The central bank also directed banks that had already published the new rates to make public new rates by complying with the directive.
NIC Asia’s increase in FD rates to above 10 percent has increased its cost of funds and put its borrowers in the line of fire. The bank has been calling up its borrowers to increase interest rates on their loans despite offering them stable interest rates for the entire duration of their loan period.
Economists believe that the decline in workers’ remittances, and rapid expansion of credit and regulatory changes in the new fiscal year have led to a liquidity problem in the market.
According to Bizmandu, NIC Asia offered loans with 18-year tenures at just eight percent per annum rate assuring borrowers that the interest rate would remain stable for the entire period. However, these days, the bank is shamelessly calling up such borrowers to pressure them to agree to higher rates. If they don't, the bank is asking the borrowers to pay up the entire loan amount.
Despite these malpractices, the NRB is yet to act against the bank.