Govt removes deposit ceiling for co-ops

KATHMANDU, OCT 31 -

The Ministry of Cooperatives and Poverty Alleviation (MoCPA) has removed the ceiling on deposit collection by cooperatives from its proposed cooperative regulation after mounting pressure from various cooperatives associations.

Earlier, the ministry had provisioned in the regulation not to allow the cooperatives to take in more than Rs 3

million from a single depositor or more than 10 times the individual’s share in a cooperative.

A high-level official at the MoCPA, however, said they had removed the provision of deposit ceiling realising that a number of cooperatives members nowadays are earning over Rs 3 million out of the cooperatives business.

“Citing that the provision could bar the mobilisation of a large amount of deposits that could otherwise be invested in productive sectors, the ministry has backtracked the earlier provision,” the official said. If the earlier regulation was endorsed, the cooperatives having individual deposits exceeding Rs 3 million would have to bring them down to the fixed level within six months from the date of implementation of the amended regulation.

Citing the condition, the cooperatives associations came down to protest the regulation after the ministry submitted the proposal to the Law Ministry.

The ministry had put in place the provision of ceiling on deposits and lending at the recommendation of two taskforces headed by Nepal Rastra Bank Deputy Governor Maha Prasad Adhikari and Finance Ministry Joint Secretary Baikuntha Aryal. Both the committees had suggested fixing a ceiling on deposits and making strong provisions of actions amid risks in the sector due to weak legal provision and lack of proper supervision.

Khem Pathak, president of the Central Agriculture Cooperatives Association, said it would have been wise on the ministry’s part to raise the ceiling than to completely remove the maximum limit. “The government has to put a system in place to prevent the misappropriation of people’s money by the cooperative operators,” he said.

Likewise, the ministry has also adopted flexibility on board members of cooperative holding the executive positions. Earlier, the proposed regulation had barred board members from holding executive positions.

As per the amended proposed regulation, a separate board and management is mandatory for the cooperatives in urban areas, whereas it is not strictly applied in case of the cooperatives in rural areas.

“Although the cooperatives in urban areas can hire a separate management body, those based in rural areas cannot do so due to shortage of efficient manpower there,” said the MoCPA official. Maintaining a separate board and executive body, Pathak said, would ensure transparency thereby controlling the possibility of embezzlement of the depositors’ money. The regulation has provisioned that a cooperative cannot provide loan more than 10 percent of the cooperative’s capital fund. It has also asked  them to lend 75 percent of their loans to the productive sector.

‘More than 2,700 co-ops handle over Rs 10m’

The number of cooperatives that carry out transactions worth more than Rs 10 million annually has reached 2,789 as of the fiscal year 2012-13, with a majority of big cooperatives operating in Kathmandu districts, according to the Depart-ment of Cooperatives (DEoC).

A total of 618 cooperatives have an annual transaction worth over Rs 50 million, while 18 of them boast an annual transaction in excess of Rs 500 million. Sixteen of them are located in the capital, while the two others are based in Jhapa district.

A total of 756 cooperatives in Kathmandu district handle transaction between Rs 10-50 million a year, with 205 of them doing annual transaction in excess of Rs 50 million. Lalitpur district has 50 cooperatives and Bhakt-apur has 28 cooperatives with annual transaction exceeding Rs 50 million.

Besides the valley, Kaski, Chitwan, Sunsari, Kaski, Rupandehi, Nawal-parasi, Morang and Jhapa districts have large number of big cooperatives with transaction worth Rs 10 million.

Source: The Kathmandu Post