Separate cooperatives bank act sought
KATHMANDU, SEP 23 -
With savings and credit cooperatives emerging as major players in the domestic financial market, a high-level task force has outlined the need for a separate cooperatives bank act.
The task force that recently submitted its report to the government has suggested either drafting a separate cooperatives bank act or making a provision of cooperatives bank in the Bank and Financial Institution Act (BAFIA) 2063 through its amendment. “As savings and credit cooperatives account for more than 50 percent of the total cooperatives in the country and a huge amount of financial transaction is being carried out through them, a separate law is necessary,” states the report.
The report also raised similar concerns expressed earlier by economists about savings and credit cooperatives. “The volume of financial transaction of savings and credit cooperatives has expanded,” read the report. “With institutional mechanism for monitoring such cooperatives being weak, it might invite a huge risk to the economy.”
The government had formed the task force in September 2009. According to Department of Cooperatives (DoC) Registrar Sudarshan Dhakal, the objective of the study was to recommend on policy level, structural and procedural reform of the sector.
The report has precisely pointed out that cooperatives in the country are poorly monitored and the regulator lacks sufficient human resources. Monitoring by the regulator, DoC, has not been effective due to lack of human resources. Until now, there are district cooperatives offices in only 38 districts. And, the department is still in shortfall of 184 staffs.
In the absence of an all-powerful regulatory body like the central bank and effective monitoring, there are fears that public deposits might be at risk with most of the savings and credit cooperatives not following prudential financial norms and involving in risky financial behaviour.
Savings and credit cooperatives in the last few years have attracted a huge amount of deposits of common people. Such is the rise that people’s deposits in cooperatives more than doubled in the last fiscal year. Cooperatives had deposits of Rs 150 billion at the end of last fiscal year, up from Rs 70 billion of 2009-10. According to bankers, such an enormous rise suggests that the country is heading towards more informal economy, posing a big challenge to the financial system.
The DoC study, which was carried out with technical support of from the Nepal Rastra Bank (NRB) last year, had found big cooperatives not following norms and running like family businesses. “Existing legal arrangements and parameters are not enough for effective monitoring of cooperatives so as to address the problems identified by the study,” reads the report.
The report has given both short- and long-term suggestions for the development of the sector. The short-term recommendations include extensive monitoring of savings and credit cooperatives, drafting a long-term cooperatives policy, and government-cooperatives partnership.
Among the long-term measures are developing the Cooperatives Board as a thinktank, establishing cooperatives offices in rest of the 37 districts and channelising cooperatives’ money in hydropower projects.
Source: Kantipur
With savings and credit cooperatives emerging as major players in the domestic financial market, a high-level task force has outlined the need for a separate cooperatives bank act.
The task force that recently submitted its report to the government has suggested either drafting a separate cooperatives bank act or making a provision of cooperatives bank in the Bank and Financial Institution Act (BAFIA) 2063 through its amendment. “As savings and credit cooperatives account for more than 50 percent of the total cooperatives in the country and a huge amount of financial transaction is being carried out through them, a separate law is necessary,” states the report.
The report also raised similar concerns expressed earlier by economists about savings and credit cooperatives. “The volume of financial transaction of savings and credit cooperatives has expanded,” read the report. “With institutional mechanism for monitoring such cooperatives being weak, it might invite a huge risk to the economy.”
The government had formed the task force in September 2009. According to Department of Cooperatives (DoC) Registrar Sudarshan Dhakal, the objective of the study was to recommend on policy level, structural and procedural reform of the sector.
The report has precisely pointed out that cooperatives in the country are poorly monitored and the regulator lacks sufficient human resources. Monitoring by the regulator, DoC, has not been effective due to lack of human resources. Until now, there are district cooperatives offices in only 38 districts. And, the department is still in shortfall of 184 staffs.
In the absence of an all-powerful regulatory body like the central bank and effective monitoring, there are fears that public deposits might be at risk with most of the savings and credit cooperatives not following prudential financial norms and involving in risky financial behaviour.
Savings and credit cooperatives in the last few years have attracted a huge amount of deposits of common people. Such is the rise that people’s deposits in cooperatives more than doubled in the last fiscal year. Cooperatives had deposits of Rs 150 billion at the end of last fiscal year, up from Rs 70 billion of 2009-10. According to bankers, such an enormous rise suggests that the country is heading towards more informal economy, posing a big challenge to the financial system.
The DoC study, which was carried out with technical support of from the Nepal Rastra Bank (NRB) last year, had found big cooperatives not following norms and running like family businesses. “Existing legal arrangements and parameters are not enough for effective monitoring of cooperatives so as to address the problems identified by the study,” reads the report.
The report has given both short- and long-term suggestions for the development of the sector. The short-term recommendations include extensive monitoring of savings and credit cooperatives, drafting a long-term cooperatives policy, and government-cooperatives partnership.
Among the long-term measures are developing the Cooperatives Board as a thinktank, establishing cooperatives offices in rest of the 37 districts and channelising cooperatives’ money in hydropower projects.
Source: Kantipur
