Cooperatives Restricted To Charge More Than One Percent Service Fee
December 9, 2020 | Investopaper
Cooperatives will not be allowed to charge a service fee of more than one percent of the total loan. The Department of Cooperatives has made a provision not to charge more than one percent service fee with effect from Magh 1, 2077. It has stated that action will be taken against the cooperatives that charge more than one percent service fee. Complaints can also be lodged with the ministry against cooperatives charging higher service charges. Similarly, a provision has been made to charge a service fee up to 0.25 percent when renewing the loan.
At present, the cooperatives have been charging up to a 5 percent service fee from the members. Discussions were held with the representatives of various associations dealing in savings and loans for the determination of service charges. The Cooperatives Act 2074 has a provision that the service fee to be charged by a cooperative when investing a loan can be fixed by the Registrar. Meanwhile, the Bagmati state government has issued the directive that service fees can be charged up to one percent at most and up to 0.25 percent when renewing. As per the Provincial Cooperatives Act, 2076 BS, one percent service fee has been fixed for loans and 0.25 percent for renewal.
Earlier, after the Department of Cooperatives set a limit on interest rates, the cooperatives had started charging exorbitant amounts in the name of service and renewal fees. The department has made a provision not to charge more than one percent service fee after receiving reports that the cooperatives have started charging service fee up to 5 percent of the total loan. Apart from the service fee, the cooperatives also charged high fees for debt management, firm fee, institution entry, institutional development, collateral valuation, and so on.
There was no legal provision in the Cooperatives Act-2048 BS to fix the service fee. However, the Cooperative Registration and Regulation Criteria-2068 had made provision not to charge more than one percent service fee of the loan as the cooperatives started charging more service fee while investing the loan. The department had introduced the reference interest rate from Shrawan last year so that the cooperatives could not charge more than 16 percent interest on loans. Reviewing the limit, it has made a provision not to charge more than 14.75 percent interest rate from Karthik 15.
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