The government has, for the first time, capped the lending rate for cooperatives at 16 per cent as the third piller of the economy – according to the Constitution – has been blamed for overcharging the poor borrowers.
According to the new rule introduced by the Department of Cooperatives (DoC) – that will come into implementation from August 4 – the cooperatives will not be allowed to charge more than 16 per cent interest rates on loans.
Organising a press meet in Kathmandu today, Registrar of Co-operatives Division Dr Tokraj Pandey said that the Department of Cooperatives (DoC) – the regulator of cooperatives – has fixed the upper limit of lending rates for the cooperatives after the decision of the Reference Interest Rate Determination and Recommendation Committee on the basis and principles laid out by the cooperatives regulation. According to the regulation, the committee has to factor in the average interest rates of saving and credit cooperatives affiliated with the federation, average interest rates of cooperative banks, average interest rates of commercial banks, reports of the studies commissioned by the government, suggestions of cooperatives federation and other associations as well as other basis that the committee deems appropriate.
The regulations also states that the reference committee should take into consideration principles including the deposit rates should be higher than the weighted average saving rates and lending rates lower than the weighted average lending rates.
Likewise, the department has also fixed the maximum interest rates spread of a cooperative to 6 per cent, which means the difference between the deposit and loan rates of a cooperative should be below 6 per cent. The new rule has ensured at least 10 per cent interest on deposits for those who put their savings in cooperatives that charge the maximum 16 per cent interest rates on their loans, according to the new rule that has set the reference rates for cooperatives in line with the provision in the ‘Cooperatives Regulation, 2019’ and the ‘Cooperatives Act 2017’.
The Act also entrusts the authority to the registrar of the department to fix the reference interest rates for cooperatives upon the recommendation of a nine-member committee. Such committee led by the registrar includes a representative from the Finance Ministry, Nepal Rastra Bank (NRB), National Cooperative Development Board, National Cooperative Federation of Nepal, and National Cooperative Bank Ltd.
There are a total of 34,512 cooperatives across the country with almost 6.4 million members. “But the new rule will be implied to some 13,578 saving and credit cooperatives with 3.5 million members,” according to the department. Due to lack of effective regulation and monitoring, cooperatives have been charging up to 25 per cent interest on loans but now the department will take action against the cooperatives, which will charge higher than 16 per cent, Pandey said.
According to the new rule introduced by the Department of Cooperatives (DoC) – that will come into implementation from August 4 – the cooperatives will not be allowed to charge more than 16 per cent interest rates on loans.
Organising a press meet in Kathmandu today, Registrar of Co-operatives Division Dr Tokraj Pandey said that the Department of Cooperatives (DoC) – the regulator of cooperatives – has fixed the upper limit of lending rates for the cooperatives after the decision of the Reference Interest Rate Determination and Recommendation Committee on the basis and principles laid out by the cooperatives regulation. According to the regulation, the committee has to factor in the average interest rates of saving and credit cooperatives affiliated with the federation, average interest rates of cooperative banks, average interest rates of commercial banks, reports of the studies commissioned by the government, suggestions of cooperatives federation and other associations as well as other basis that the committee deems appropriate.
The regulations also states that the reference committee should take into consideration principles including the deposit rates should be higher than the weighted average saving rates and lending rates lower than the weighted average lending rates.
Likewise, the department has also fixed the maximum interest rates spread of a cooperative to 6 per cent, which means the difference between the deposit and loan rates of a cooperative should be below 6 per cent. The new rule has ensured at least 10 per cent interest on deposits for those who put their savings in cooperatives that charge the maximum 16 per cent interest rates on their loans, according to the new rule that has set the reference rates for cooperatives in line with the provision in the ‘Cooperatives Regulation, 2019’ and the ‘Cooperatives Act 2017’.
The Act also entrusts the authority to the registrar of the department to fix the reference interest rates for cooperatives upon the recommendation of a nine-member committee. Such committee led by the registrar includes a representative from the Finance Ministry, Nepal Rastra Bank (NRB), National Cooperative Development Board, National Cooperative Federation of Nepal, and National Cooperative Bank Ltd.
There are a total of 34,512 cooperatives across the country with almost 6.4 million members. “But the new rule will be implied to some 13,578 saving and credit cooperatives with 3.5 million members,” according to the department. Due to lack of effective regulation and monitoring, cooperatives have been charging up to 25 per cent interest on loans but now the department will take action against the cooperatives, which will charge higher than 16 per cent, Pandey said.
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