Govt labels 27 co-ops as 'troubled'

KATHMANDU, Aug 13:

A high-level committee formed under Nepal Rastra Bank deputy governor Maha Prasad Adhikari has declared 27 financial cooperatives as ‘troubled’ after they failed to return depositors’ money due to their inability to recover quite a big chunk of loans on time.

All of these crisis-ridden savings and credit, and multipurpose cooperatives are located in Kathmandu or Lalitpur districts.

The savings and credit cooperatives that have been labeled as troubled are Dipshikha, Rasha, Anjuli, Sukunda, Corona, Ugrachandi, Cosmic, Demand and Pitashri. Some other savings and credit cooperatives declared as troubled by the high-level committee are Paridrishya, Shine, Sin, Indrawati, Kamalin and Gaganchuli.

Also, Rupantaran, Guna, Grace, Exim, Madhyapur, Muskilma Sajilo and Jay Shivashakti multipurpose cooperatives have been identified as troubled. Other crisis-ridden cooperative units are Future Keys Swasthya Cooperative, Himshikhar Cooperative, Oriental Cooperative, Pacific Savings and Investment Cooperative, and Shuvashree Cooperative.

“Most of these units were engaged in haphazard lending practices which eroded their capacity to return money back to customers,” Department of Cooperatives registrar Kedar Neupane said. “We have asked them to come up with a detailed deposit payment plan, which should give priority to depositors who have parked small amount.” The committee has also proposed that collateral pledged by loan defaulters be auctioned so as to compensate depositors. “We have also proposed that investigations be launched into assets held by these cooperatives while focusing on loan recovery process,” Neupane said.

Since the establishment of first cooperative in the 1950s, the number of savings and credit and multipurpose cooperatives today has soared to over 15,000.

Over the years, these units have played a key role in providing banking services to unbanked customers as they rapidly expanded their network to every nook and corner to collect deposit and provide hassle-free credit service. Because of their presence almost everywhere they have been able to rope in a huge number of customers, while mobilising deposits to the tune of Rs 200 billion, which is roughly 90 per cent of deposits collectively held by development banks and finance companies.

And this is where the problem lies.

“Many cooperatives that operate like banks have been able to create quite a large customer base but due to lack of discipline many have failed to fulfill their primary responsibility of protecting the interest of depositors,” Neupane said.

This attitude is expected to hit hundreds of thousands of self-employed people or operators of small businesses, who have parked their hard earned money in these units. “To protect interest of many depositors we need to amend the existing law. And the committee has highlighted this point in the list of recommendations forwarded to the government,” Neupane said.

Currently, the cooperatives sector is governed by an obsolete Cooperatives Act 1992, which does not allow tough penalties on those that do not play by rules.

For instance, the law only allows the government to slap maximum fine of Rs 1,500 on cooperatives, while legal action can only be taken against them after their members file police complaints.

Keeping this in view, the committee has therefore asked the government to put a cap on their investment and individual deposits they collect.

But will such ceilings work is a big question as cooperatives have a bad track record when it comes to abiding by rules.

‘Troubled’ cooperatives

• Dipshikha Savings and Credit, Lalitpur

• Rasha Savings and Credit, Lalitpur

• Anjuli Savings and Credit, Lalitpur

• Sukunda Savings and Credit, Lalitpur

• Corona Savings and Credit, Lalitpur

• Rupantaran Multipurpose, Lalitpur

• Ugrachandi Savings and Credit, Lalitpur

• Future Keys Swasthya Cooperative, Lalitpur

• Guna Multipurpose, Lalitpur

• Himshikhar Cooperative, Lalitpur

• Cosmic Savings and Credit, Kathmandu

• Demand Savings and Credit, Kathmandu

• Pitashri Savings and Credit, Kathmandu

• Grace Multipurpose, Kathmandu

• Kamalin Savings and Credit, Kathmandu

• Gaganchuli Savings and Credit, Kathmandu

• Oriental Cooperative, Kathmandu

• Paridrishya Savings and Credit, Kathmandu

• Exim Multipurpose, Kathmandu

• Pacific Savings and Investment, Kathmandu

• Madhyapur Multipurpose, Kathmandu

• Muskilma Sajilo Multipurpose, Kathmandu

• Shuvashree Cooperative, Kathmandu

• Shine Savings and Credit, Kathmandu

• Jay Shivashakti Multipurpose, Kathmandu

• Sin Savings and Credit, Kathmandu

• Indrawati Savings and Credit, Kathmandu

Source: THT