Nepal Caps Cooperative Lending Rates at 13% in Sweeping Consumer Protection Move
Nepal's Office of the Cooperatives Registrar has capped cooperative lending rates at 13%, down from 16%, effective Thursday. The directive also limits the interest spread to six percentage points, bans hidden fees, and prohibits discriminatory rates among members and staff.
KATHMANDU, Sept 18 — The government has capped the interest rates cooperatives can charge on loans at 13 percent, effective from Thursday, in a move aimed at easing borrowing costs and tightening oversight of the sector.
The Office of the Cooperatives Registrar (OCR), operating under the Ministry of Land Management, Cooperatives, Federal Affairs and General Administration, has set the reference lending rate for cooperatives at a maximum of 13 percent, down from the previous 16 percent.
According to the OCR, institutions may set rates below 13 percent after analyzing their operational status, requirements, and justification. In addition, the spread — the difference between the interest paid on savings and the interest charged on loans — must not exceed six percentage points.
The OCR has also issued a series of compliance directives:
- Cooperatives must strictly comply with the legal ban on capitalizing accrued interest into the principal loan amount to charge compound interest.
- Any penalty charge cannot exceed five percent of the outstanding interest amount.
- Since all loan-related costs must be included within the interest rate itself, cooperatives cannot levy additional fees under headings such as administrative fees, service charges, renewal fees, form fees, or similar categories.
Under the new rules, cooperatives are required to publicly disclose their set interest rates — via their websites or other media platforms — to inform members.
A provision also prohibits discrimination in 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, cooperatives must deposit funds into the respective borrowing member's personal account.
The OCR directive further 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.