Govt to set deposit limit for cooperatives

KATHMANDU, MAR 22:

Government is preparing to set a deposit limit for savings and credit cooperatives.

An advisory committee led by joint secretary of the Ministry of Finance Baikuntha Aryal has provided a suggestion to enforce a Rs three-million deposit limit for individuals in cooperatives. It has mentioned that since cooperatives are basically for the poor and lower middle class people, the Rs three million limit is feasible.

The committee has requested Nepal Rastra Bank (NRB) to set the deposit limit and enforce it at the earliest. Similarly, it has urged the central bank to strongly monitor savings and credit cooperatives operating in urban and semi-urban areas.

The popularity of cooperatives has been increasing even among business houses and the elite class people. “Cooperatives are being used to deposit black money, so strict regulation is a must to control such activities,” a committee member said.

Five-member committee has representatives from the Ministry of Cooperatives and Poverty Alleviation, Department of Cooperatives, National Cooperatives Association, and Nepal Rastra Bank.

The committee has also urged for a cap in interests offered by cooperatives. “There is no rational in the interests being offered by cooperatives. They are just attracting deposits,” said the member. According to him, people who are attracted by such attractive interest rates and their deposits are at risk.

About Rs 25 billion that has been deposited in cooperatives is at risk at the moment. According to an estimate, deposits in the cooperative sector has increased in recent months and the total deposit has reached Rs 150 billion, as compared to Rs 110 billion last year. Banks and finance companies had deposits worth Rs 901 billion till last week.

Earlier, the committee had decided to ban cooperatives from advertising through signboards and hoarding boards. However, the decision has not been genuinely implemented.

“Cooperative sector must reduce interest rates and the Department of Cooperatives must set a time line for it,” the member said. The committee has also suggested for the member fee provision of cooperatives to be revoked. It has asked NRB to monitor cooperatives with deposits of more than Rs 500 million. Similarly, cooperatives with deposits of Rs 50 million must also come under strict regulation, it added.

About 27,000 cooperatives are in operation in the country and 12,000 are savings and credit cooperatives. Cooperatives operating in urban areas have been suffering from liquidity problem due to excessive loans to the realty sector.

Source: THT