First Business News Portal in English from Nepal
KATHMANDU: The government has capped the interest rate on loansbeing disbursed by the cooperatives at 14.75 percent.
The Reference Interest Rate Determination and Recommendation Committee on Monday decided that cooperatives will not be allowed to charge more than 14.75 percent interest on any type of loans that they provide.
Prior to this, the Department of Cooperatives had set the upper limit of lending rates at 16 percent. The department set a new reference rate by amending the earlier provision. As per the department, the new arrangement will come into effect from October 31.
Stating that the cooperatives had been charging exorbitant interest ratesas per their will, the committee in July had dropped the reference interest rate from 19 percent to 16 percent, which has been further revised downward. The department has claimed that all the cooperatives have followed the reference interest rate.
Similarly, the cooperatives now cannot provide more than 8.75 percent interest on savings deposits. There is a provision that the difference between the credit interest and savings interest must be lower than six percent. Due to this provision, the cooperatives cannot provide higher rates on savings now.
The committee was formed under the coordination of the registrar of the Department of Cooperatives. It is the first time that the committee has revised the reference interest rate. After Nepal Rastra Bank set the maximum interest rate limit for microfinance institutions at 15 percent, there was pressure on cooperatives to maintain lower interest rates and this is the reason why the committee has revised the reference interest rate.
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