Kathmandu. Co-operatives will no longer be able to charge more than a maximum of 13 percent interest while giving loans to members.

The Office of the Registrar of Cooperatives has issued a new directive regarding the reference interest rate.

In exercise of the committee’s recommendation as per Section 51 (1) of the Cooperative Act, 2017 and Rule 69 of the Cooperative Rules, 2075, the Office has issued the directives regarding the interest rate.

This provision will come into effect from September 17. Earlier, the maximum limit of interest rate in the case of cooperatives was fixed at 16 percent.

Similarly, the difference between the interest rate of the loan taken by the cooperatives from the members and the interest rate on savings of the members should not be more than 6 percent.

The cooperative can also fix the interest rate of less than 13 percent by analyzing the situation, need and justification of the transaction of the institution. However, even in such a situation, the difference between the interest rate on savings and the interest rate taken on loan should not be more than 6 percent. That is, considering the maximum limit of 13 percent, the institution can maintain an interest rate lower than that according to its financial condition.

The office has stopped the work of charging interest on interest. Provision has been made that the interest on the loan issued by the co-operative society to the member can be capitalized on the original loan and interest cannot be charged again on the basis of that. This has stopped the tendency of adding interest to the principal of the loan and charging interest on it again.

If the co-operative decides to take compensation from any member, it will not be allowed to take more than five percent of the interest amount to be collected. It also limits the additional fee to be charged from the members who are late in the payment of the interest of the loan.

The new directive also prohibits the collection of additional amount under various headings which are not related to the actual cost of the loan. Since all the costs related to the loan provided by the cooperative to the members are at the rate of interest, there is a provision that no additional amount can be charged under administrative charges, service charges, renewal fees, form fees or any other such headings.

The cooperatives will also have to make public the interest rate determined by them in a transparent manner.

It also prohibits different rates of interest on savings or loans of the same nature according to the members. There is no discrimination between the members of the co-operative society, members and office bearers of the board of directors, coordinators and members of the accounts supervision committee, coordinators and members of various sub-committees, managers and employees while maintaining the interest rate on savings or loans of the same nature.

Similarly, a provision has been made that the co-operative society should deposit the amount in the personal account of the concerned borrower member while disbursing the loan. It is stated in the directive that the liability of the member cannot be added to the liability by creating additional debt burden on behalf of the institution in excess of the loan obligation taken by the member personally. That is, the institution will not be allowed to carry out transactions in the process of disbursement of loans in such a way as to create more burden than the actual debt obligation of the member.