Cooperatives barred from charging more than 13 percent interest on member loans

Kathmandu, September 17, 2026 — The Office of the Registrar of Cooperatives has revised the reference interest rate, setting the maximum interest rate cooperatives can charge members on loans at 13 percent with immediate effect.

The decision follows recommendations from a committee formed under Section 51 of the Cooperative Act, 2017.

The previous maximum interest rate for cooperative loans was 16 percent. Under the revised provision, cooperatives are prohibited from charging more than 13 percent interest on loans issued to members. Individual cooperatives may, however, set rates below the ceiling after assessing their operating conditions, requirements and justification.

The revised directive has also limited the interest-rate spread—the difference between the interest paid on deposits and charged on loans—to a maximum of 6 percentage points.

The Office of the Registrar has instructed cooperatives to comply with legal provisions prohibiting them from adding accrued interest to the principal loan amount for the purpose of charging compound interest.

For delayed loan payments, any penalty imposed by a cooperative cannot exceed 5 percent of the outstanding interest amount.

The directive also clarifies that all costs associated with loan processing must be incorporated into the applicable interest rate. Cooperatives cannot levy additional charges under headings such as administrative fees, service charges, renewal fees, form fees or other similar categories.

Cooperatives have been instructed to publicly disclose the interest rates they determine through their websites or other accessible platforms to ensure members are informed.

The directive further prohibits cooperatives from setting different interest rates for similar types of savings or loans based on a person's position within the institution. Ordinary members, board members, executive officers, chairs or members of accounts supervision committees, sub-committee officials, managers and staff must not be discriminated against in determining such rates.