September 22: Operators of cooperatives are in a tug-of-war with the regulatory body over the issue of increasing the reference rate on loans. The cooperatives have been demanding an increase in reference rate ever since the banks and financial institutions increased the interest rates from September 17. However, the officials of the Department of Cooperatives, the regulatory body of the cooperatives, say that the Minister for Cooperatives is against the idea of increasing the interest rates. The officials also argue that the existing laws do not allow them to increase the reference rate.

Speaking at a programme organized by Cooperative Journalists Society of Nepal,  the operators of cooperatives warned that they will not abide by the gentlemen’s agreement if the concerned body does not review the reference rate.

In response, the government authorities warned that they will take action against the cooperatives if they charge interest rate higher that the ones fixed by the department.

Senior Vice President of the Federation of National Cooperatives Om Devi Malla said that the cooperatives have already started charging higher interest rates on loans than the prescribed limit to cope with the market pressure.

“The cooperatives are charging interest at their own will,” said Malla, adding, “The federation will not take any action against them. Let the department take appropriate action.”

Malla accused the department of ignoring their repeated calls to hold a meeting to discuss about reviewing the reference rate.

“While  fixing the interest rate last time, all sides had agreed to hold a meeting every four months. However, there hasn’t been any meeting in the last six months,” said Malla.

There is a provision in Cooperatives Act to  fix the interest rate by a meeting chaired by the registrar of the Department of Cooperatives.

The meeting must be attended by five members of the government and four from the Federation of National Cooperatives and the Cooperatives Campaign.

The last such meeting had fixed the reference rate at 16 percent on February 25. However, the cooperatives have demanded an increase in reference rate after the BFIs increased the interest rates on September 17 arguing that the deposits of cooperatives have started flowing towards the banks.