KATHMANDU, Feb 20: Cooperatives look forward to raising their reference interest rate to 16.22 percent from the current 14.75 percent per annum, citing a surge in the banks’ interest rates in recent days.
A sub-committee formed to study the prospects of revising the interest rate in cooperatives has recommended to the government authority to raise the reference rate by 1.47 point percent, an addition of 10 percent to the existing interest rate. Nepal Rastra Bank (NRB) has provisioned the banks to revise interest rates by a maximum of 10 percent on the prevailing rates.
Cooperatives have long been demanding that the government raise the reference rate in line with the hiked interest rates by banks. Last month, the government formed a study committee under Tola Raj Upadhyay, deputy registrar of the Department of Cooperatives. General Manager of National Cooperative Federation of Nepal Chitra Kumari Subba, CEO of National Cooperative Bank Limited Badri Kumar Guragain, CEO of Nepal Federation of Savings and Credit Cooperative Unions Prakash Prasad Pokharel and representatives from the Ministry of Finance and NRB are among other members.
In November 2020, the government capped lending interest rate by savings and credit cooperatives at 14.75 percent per annum. At that time, the interest rate was reduced by 1.25 percent.
Citing liquidity crunch in Nepal’s banking system and increased interest rates by the banks, the cooperatives operators have recently been pushing the sector’s regulator to make it at least 16.75 percent. According to them, the cost of funds for cooperatives has surged by a notable amount after the banks raised their interest rates to more than 12 percent.