The Government of Nepal has introduced stricter interest rate regulations for cooperative institutions, setting the maximum lending interest rate at 13 percent, effective from Ashoj 1, 2083 BS. According to a directive issued by the Office of the Cooperative Registrar under the Ministry of Land Management, Cooperatives and Poverty Alleviation, the revised ceiling follows a recommendation from the committee constituted under Section 51(1) of the Cooperative Act, 2074. The directive replaces the previous maximum reference interest rate of 16 percent and requires cooperative institutions to comply with the revised ceiling. It further specifies that the difference between interest rates on savings and loans must not exceed six percentage points, reinforcing regulatory oversight of cooperative lending practices.
The directive requires cooperatives to determine interest rates based on their financial condition, operational requirements and sustainability, while ensuring that lending rates remain within the prescribed ceiling. Cooperatives are prohibited from charging additional administrative fees, service charges, renewal fees, processing fees or other hidden charges on loans beyond the applicable interest rate. Furthermore, loans provided to members must be treated as principal transactions, with interest calculated separately, preventing institutions from incorporating unpaid interest into the principal amount. The directive also states that when cooperatives decide to collect loans through lump-sum repayment arrangements, the amount collected cannot exceed the original principal by more than five percent.
To improve transparency and protect members, cooperatives must publicly disclose their approved interest rates through institutional notices or appropriate communication channels and apply the same category of interest rate consistently to all eligible members. The regulations prohibit discriminatory treatment between members, board directors, accounting supervision committee officials, subcommittee representatives, managers and employees. Additionally, loan disbursements must be deposited directly into borrowers’ personal accounts, and cooperatives cannot automatically deduct savings deposits to recover outstanding loans without following the applicable procedures. The directive also requires institutions to provide clear information about lending arrangements and comply with established cooperative governance standards.
The Office of the Cooperative Registrar has instructed all concerned cooperatives, including those affiliated with national and central cooperative organizations, to implement the regulations without delay. The circular emphasizes that failure to comply with the prescribed interest rate ceiling and related provisions may result in legal action under the Cooperative Act, 2074. The Ministry of Land Management, Cooperatives and Poverty Alleviation has also forwarded the directive to its Planning and Development Assistance Coordination Division for necessary action and public dissemination. The measures are intended to reduce excessive borrowing costs, prevent unfair financial practices and strengthen accountability within Nepal’s cooperative sector.
