Cooperatives hold Rs 158b in deposits
KATHMANDU, NOV 16 -
Cooperatives held deposits worth Rs 158 billion as of the last fiscal year which is equivalent to more than 12 percent of the deposits held by banks and financial institutions. According to Nepal Rastra Bank (NRB), A, B and C class banks and financial institutions had deposits of Rs 1,250 billon at the end of 2012-13.
The figure is much higher than the deposits held by finance companies and a little lower than the deposits held by development banks. Finance companies held deposits of Rs 68.98 billion and development banks had Rs 160 billion at the end of the last fiscal.
Since the cooperative sector is not properly regulated due to the absence of stringent legal provisions, concerns have been raised that this large amount of savings belonging to the public could be misused and mismanaged creating trouble in the entire cooperative sector. The Cooperative Act 1992 is concerned more with expanding the sector than regulating it.
According to the Department of Cooperative, 90 percent of the deposits collected by all types of cooperatives are held by savings and credit cooperatives .
The majority of savings and credit cooperatives are operating in urban areas, and they have invested massively in risky sectors such as real estate. In the absence of proper safeguards by the Department of Cooperatives, which is legally weak to regulate and supervise them and is also understaffed, anomalies have flourished in such cooperatives . Most of the cooperatives which have gotten into trouble are savings and credit cooperatives and multipurpose cooperatives . Their problems stem mainly from bad governance on the part of their promoters and directors.
Chiranjeevi Nepal, chief economic advisor at the Finance Ministry, said the increasing amounts of deposits with the cooperatives sector indicates that there has been a rise in the informal sector which cannot be considered good for the economy. “The sector is not properly regulated and that may lead to risks,” he added.
Recognizing the impending risk in the sector, the government has formed two committees led by NRB Deputy Governor Maha Prasad Adhikari and Finance Ministry Joint Secretary Baikuntha Aryal to assess the status of cooperatives and make recommendations for proper regulation of the sector. Problems have appeared in large cooperatives such as Oriental and Guna apart from other cooperatives , forcing the government to look closely at the neglected sector which has powerful political backing for promotion.
Based on the recommendations of the two committees, the Ministry of Cooperatives and Poverty Alleviation has prepared a draft regulation for cooperatives which has included a number of provisions like putting a cap on the size of loans and requiring cooperatives to issue 75 percent of their loans to the productive sector. The government has, however, removed the proposed cap on deposits from the draft regulation which has been sent to the cabinet for its okay.
Registrar of the Department of Cooperatives Kedar Neupane said that the regulator imposed a moratorium on registration of new savings and credit cooperatives in urban areas six months ago as per the recommendation of the Aryal committee to control unchecked growth of such cooperatives .
There are 29,526 cooperatives operating in the country. As per the department, over 3,000 new cooperatives were added only in the last fiscal year. The number of savings and credit cooperatives increased to 12,916 from 11,851. “Compared to previous years, the growth rate has declined due to the moratorium,” Neupane said.
Source: The Kathmandu Post
