May 9: Nepal Rastra Bank (NRB) has removed the provision that allows banks to change the interest rate on loans only once in a quarter. Along with this decision, banks and financial institutions will now have to change the interest on loans every month.

On Monday, Nepal Rastra Bank issued instructions to banks and financial institutions of A, B and C categories to change the interest on loans every month.

The central bank has made new arrangement to change the interest on loans in a monthly basis according to the base rate of the last three months.

"While changing the interest on loans, it has to be changed on a monthly basis considering the increase or decrease in the average base rate of the last three months," reads the instructions issued by the central bank.

Prior to this, there was an arrangement for changing the interest rate on loans on a quarterly basis.