NRB starts scrutiny of troubled co-ops

KATHMANDU, MAR 06 -

The Nepal Rastra Bank (NRB) has started scrutinising 22 cooperatives facing liquidity crunch as per the recommendation of the Department of Cooperatives.

“We have asked the cooperatives to furnish their audited balanced sheets and other financial details,” said NRB Deputy Governor Maha Prasad Adhikari at an interaction here on Tuesday.

The government has formed a taskforce under the central bank to study the country’s cooperatives’ situation after some of the large cooperatives, including Oriental, Guna, Ugrachandi, Corona and Exim, landed in trouble. These cooperatives suffered liquidity shortage mainly due to overexposure to the realty sector.

According to Adhikari, the taskforce, which has formulated a working procedure for the study, will assess the nature of collateral accepted by the cooperatives while providing loans, the financial status of borrowers and possibility of loan recovery.

There are over 26,000 cooperatives in the country, out of which more than 11,000 are savings and credit cooperatives. Around 700 saving and credit cooperatives have annual transaction of over Rs 50 million. Many of these cooperatives offered high interest rates on deposits to attract depositors and invest in the realty sector.

The central bank has found that in most of crisis-ridden cooperatives, lending was made under the sole decision of their executive.

“The problem is found mainly in those cooperatives which ignored the role of their members in the decision making process and day-to-day operation,” said Adhikari, adding the central bank could also investigate other cooperatives if recommended by the DoC.

DoC Registrar Kedar Neupane said the department has started formulating a new cooperatives standard to regulate the sector effectively. He said the cooperatives landed in trouble due to their investment in the unproductive sectors.

Source: The Kathmandu Post