Ceiling on savings in cooperatives The government will set a limit on individual savings in cooperatives after the investigation committee recommended to do so stating that big transactions are done through cooperatives and risks are raised by unlimited mobilization of savings by a single individual. The committee formed under Deputy Governor of the Nepal Rastra Bank (NRB) Maha Prasad Adhikari to investigate troubled saving and credit cooperatives had submitted its report to Chief Secretary Lila Mani Paudel on July 12 with recommendations to set a ceiling of certain percent. Another investigation committee led by Joint Secretary at the Finance Ministry Baikuntha Aryal had also earlier recommended for a ceiling of Rs 3 million but the recommendations had not been implemented. The committee led by Adhikari, in its report prepared in five months, has also recommended that board members of cooperatives not be allowed to stay in any executive position at the institution, and promoters, executive chief and member of the accounts committee not be from a single family concluding that some promoters are operating cooperatives as a family business and are misusing savings. The committee has also recommended that big cooperatives with transaction of over Rs 100 million be asked to publish financial reports every three month to make them transparent. Only banks and financial transactions have been publishing financial details every three month. It has also suggested that special audit should be done in cooperatives with transaction of over Rs 500 million. The report states that risks have increased due to lack of security of the savings with cooperatives and no exchange of credit information. It has advised for provisions to ensure that the cooperatives exchange information among each other and blacklist the defaulters. It has also concluded that the Cooperatives Act has not clearly specified banking transactions done through cooperatives and its area, there are no effective regulatory and supervisory provisions for security of the collected deposits, and self-regulatory provisions were weak in it. It has also pointed at the weaknesses like some cooperatives being run like a family business, commoners were lured through aggressive advertizing, violation of the ceiling on investment in realty sector, and weak education and training about cooperatives. It has also stated that accounts committees are not effective, regulatory authority Department of Cooperatives (DOC) also lack capabilities, and saving and credit cooperatives are commercial and city-centric. It has also recommended for reform of Cooperatives Act, make all the cooperatives affiliated to subject-wise associations and immediate creation of a separate Micro Finance Authority Act for monitoring of saving and credit cooperatives. The government had formed the committee on January 25 after problems in big cooperatives in the urban areas. Joint Secretary at the Finance Ministry Krishna Prasad Devkota, Joint Secretary at the Ministry of Cooperatives Ram Krishna Subedi, Joint Secretary at the Ministry of Land Reforms and Management Krishna Raj BC, Vice President of the National Cooperatives Association Bijay Raj Ghimire, President of the Nepal Saving and Credit Cooperatives Association Min Kandel, and Promoter of the National Cooperatives Association Dakshya Poudel were members and Registrar of DOC Kedar Neupane the member secretary of the committee. Management committee for troubled cooperatives The committee has also recommended for creating environment for return of deposits by forming a powerful management committee including shareholders to solve problems of the troubled cooperatives unable to return deposits. Such management committees to be formed by DOC will recover loans provided by the cooperatives, auction off assets kept as surety, and investigate hidden assets to recover the loans. It has advised the government to take a special decision to form such management committees due to lack of legal clarity. The investigation committee led by Adhikari had studied 27 cooperatives including Oriental, Guna, Himshikhar, Exim and others forming technical sub-committees. The report points that cooperatives have invested in realty and other sectors, and savings of the depositors can be returned if such investment were managed properly. Around two dozen cooperatives have failed to return deposits worth around Rs 700 billion in the past one year. The budget for the fiscal year 2070/71 also announced formation of management committees as per the recommendations of Adhikari’s committee. The budget also has provisions of NRB deploying team of experts for monitoring of cooperatives with transaction of over Rs 500 million and enhancing capabilities of DOC
Posted on: Thu, 01 Aug 2013 13:20:04 +0000
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