KATHMANDU, Feb 15: The government has made it mandatory for cooperatives to invest at least 51 percent of their lending in the production sectors in a bid to restrict rampant lending by the organizations to private companies.
Through enforcing a unified directive on Sunday, the Department of Cooperatives (DoC) directed the cooperatives to invest the aforementioned amount in agriculture and forestry, hydropower, education, health, employment and skill development projects. Similarly, the cooperatives will have to clearly state in their objectives of bylaws if they are to invest in hospitals, academic institutions, hotels, hydropower companies and petrol pumps, among others.
The DoC has also asked the cooperatives to maintain the necessary amount in their risk management funds and a minimum of 10 percent in the liquidity management fund in order to distribute dividends to their members. The cooperatives can charge service fees of only up to 0.50 percent from borrowers while renewing their loans.
The DoC has also restricted cooperatives to invest in private companies. The cooperatives need to endorse their investment in private companies only after receiving approval from the annual general meeting.
The sector’s regulator has come up with the provision after a number of cooperatives landed in financial problems mainly due to the cooperatives investing in the private companies out of their depositors’ money. As a result, Civil Cooperative and Oriental Cooperative, among others, have failed to pay back their depositors’ money after the private companies they invested faced a financial crisis.