KATHMANDU, Sept 18: The government has capped interest rates charged by cooperatives on their loan at 13 percent effective from Thursday.
The Office of the Cooperatives Registrar (OCR) under the Ministry of the Land Management, Cooperatives, Federal Affairs and General Administration has fixed the reference interest rate for cooperatives at a maximum of 13 percent. Previously, the rate was fixed at 16 percent.
According to the OCR, institutions may set interest rates lower than 13 percent after analyzing their operational status, requirements, and justification. Additionally, a provision has been made ensuring that the spread—the difference between the interest rate paid on savings and the interest rate charged on loans—must not exceed six percentage points.
Revised interest rate corridor system introduced
The OCR has also directed cooperatives to strictly comply with the legal provision prohibiting the capitalization of accrued interest into the principal loan amount for the purpose of charging compound interest.
Furthermore, if an institution decides to levy a penalty charge, it cannot exceed five percent of the outstanding interest amount. Since all loan-related costs are to be included within the interest rate itself, the OCR has stated that cooperatives cannot charge additional fees under headings such as administrative fees, service charges, renewal fees, form fees, or any other similar categories.
Under the new directives, cooperatives are mandatorily required to publicly disclose the interest rates they have set—via their websites or other media platforms— in order to inform their members about the rates.
A provision has also been established prohibiting any discrimination regarding interest rates for the same type of savings or loan among members, the board of directors and office bearers, the audit and supervision committee (coordinators and members), various sub-committee coordinators and members, managers, and employees. While disbursing loans, cooperative organizations must deposit the funds into the respective borrowing member's personal account.
The OCR directive states that additional debt burdens cannot be imposed on a borrowing member by linking the loan to the organization's liabilities in a way that exceeds the loan obligation personally incurred by the member.
