Co-ops consider raising benchmark interest rate to 16.22pc – myRepublica

KATHMANDU, February 20: Cooperatives are eagerly awaiting a hike in their benchmark interest rate to 16.22% from the current 14.75% pa, citing a spike in bank interest rates in recent days.

A subcommittee formed to study the prospects for revising the interest rate in cooperatives has recommended that the government authority increase the reference rate by 1.47 percentage points, i.e. an addition of 10 percent to the rate of existing interest. The Nepal Rastra Bank (NRB) has allowed banks to revise interest rates by up to 10% from prevailing rates.

Co-ops have long called on the government to raise the benchmark rate in line with interest rate hikes by the banks. Last month, the government formed a study committee under the leadership of Tola Raj Upadhyay, Deputy Registrar of the Department of Cooperatives. Managing Director of National Cooperative Federation of Nepal Chitra Kumari Subba, CEO of National Cooperative Bank Limited Badri Kumar Guragain, CEO of Nepal Federation of Credit Unions Prakash Prasad Pokharel and representatives of the Ministry of Finance and the NRB are among the other members.

In November 2020, the government capped the interest rate on credit union loans at 14.75% per annum. At that time, the interest rate was reduced to 1.25 percent.

Citing the shortage of liquidity in the Nepalese banking system and the increase in bank interest rates, cooperative operators recently pushed the sector regulator to raise it to at least 16.75%. According to them, the cost of funds for cooperatives increased by a significant amount after the banks raised their interest rates to more than 12%.

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