Chapter-3 Functions, Duties and Powers of Institutions
Functions, duties and powers of institutions: The functions, duties and powers of the institutions shall, in addition to the functions, duties and powers set forth elsewhere in this Act, be as follows:
(a) To encourage the persons with low income to form groups,
(a1)13 To collect micro-savings from groups or members of groups,
(b) To disburse micro-credit without or without taking security or guarantee of any movable, immovable property to a group or the members of a group to carry on a micro-business,
(c) To obtain loans or grants from the Government of Nepal or14 a bank or native or foreign organization, association etc. and to use such loans or grants in the disbursement of micro-credit or in the activities making such act effective, 15Provided, however, that in obtaining loans, grants or other assistance from a foreign organization, association etc, the institution has to obtain approval of the Government of Nepal through the Bank.
(d) Prior to disbursing the micro-credit, to evaluate the work for which the credit has been demanded, and identify whether such a work is feasible or not,
(e) To make publicity about the micro-businesses which are of such nature as to bring about improvement in the economic condition of the persons with low income,
(f) To hold symposia about the micro-business, give training to formulate projects, render assistance, provide technical knowledge and bring about technical assistance as per necessity,
(g) To provide necessary services to the groups in relation to the mobilization of the micro-saving and16 micro-credit,
(h) To take necessary action towards the recovery of micro-credit in time,
(i) To make inquiry, from time to time, into whether the microcredit has been properly utilized or not, and if, in the course of making such inquiry, it appears that the micro-credit has not been utilized properly, to give necessary direction or take necessary action17
(j) To perform such other functions as prescribed in relation to the collection of the micro-saving and18 disbursement of the micro credit,
(k) To act as an agent of a commercial bank or financial institution.
Power to demand details, data or documents: The Bank may demand any details, data or documents relating to the micro-saving and19 micro-credit from an institution, and it shall be the duty of the concerned institution to submit the details, data or documents so demanded.
To enter into agreement: (1) In disbursing the micro-credit, an institution shall enter into agreement in writing with the borrower, with such terms as required for the protection and proper use of the credit.
(2) In entering into an agreement pursuant to Sub-section (1), the institution may so specify the terms that the repayment period of the loan may be any period whatsoever, that the institution may require the borrower to repay the credit in the event of violation of any terms specified by the institution and that the institution may recover the same from the security or collective guarantee furnished by the borrower by executing a deed to that effect. Provided that, in taking security from the borrower, the institution shall not take security of any person that is not related with the group.
Power of institution in the event of violation of terms: (1) If any borrower does not abide by the agreement or terms thereof entered into with the institution or fails to repay the micro-credit to the institution within the period specified in the deed or if, upon an inquiry held by the institution, it appears that the borrower has misused or misappropriated the amount of the micro-credit so borrowed, the institution may, notwithstanding anything contained in the prevailing laws, recover its principal and interest by auctioning the security furnished or held by the borrower to or with the institution, in accordance with the prevailing laws.
(2) If the borrower transfer, in any manner, the title to the security which the borrower has furnished with the institution to any other person or if, for any reason, the price of the security furnished with the institution is devalued, the institution may, notwithstanding anything contained in the prevailing laws, require the borrower to furnish additional security covering the credit for the same within the time-limit specified by the institution. If the borrower fails to furnish such a security within the time-limit specified by the institution, the institution may recover its principal and interest by auctioning the property furnished as the security.
(3) If, in making recovery by making auction pursuant to Sub section (1) or (2), the whole of the principal and interest of the institution cannot be recovered from such a security, the institution may recover its principal and interest by auctioning other assets of a member where the member has borrowed the micro-credit personally and of the members of a group where the micro-credit has been borrowed collectively.
(4) The amount of expenditure incurred in making auction sale of the property and principal and interest of the institution shall be deducted from the proceeds of the auction sale made pursuant to this Section, and the remaining amount shall be returned to the concerned person ^20
(5) If, in making auction sale pursuant to this Section, any one does not take over, the institution may itself take over the property as prescribed 21
Registration or transmission to be made: (1) The institution shall write to the concerned Land Revenue Office for the registration or transmission of the property held as security in the name of the person, if any, who takes over it at the auction sale made pursuant to Section 11 or in the name of the institution if the institution takes it over because no one has taken it over, in accordance with the prevailing laws.
(2) If a request is made by the institution pursuant to Subsection (1), the concerned Land Revenue Office shall effect registration or transmission.
To determine the rate of interest: (1)23 The institution shall itself determine the interest to be charged and given by it on the micro saving and micro-credit, subject to the policies and directions of the Rastra Bank.
(2) Notwithstanding anything contained in Sub-section (1), if the Bank so considers necessary, it may give direction to the institution to alter the rate of interest determined by the institution, and it shall be the duty of the concerned institution to abide by such
Power to collect service charge: The institution may collect 24…………. service charge in consideration for any service, facility, technical knowledge or training it has provided to any person or group in relation to the mobilization of the micro-saving and microcredit25
To maintain records: The institution shall maintain updated records of activities relating to the financial intermediation.