DoC asks cooperatives to invest at least 51 percent of their loans in production businesses

Published On: May 27, 2022 07:00 AM NPT By: Republica  | @RepublicaNepal

KATHMANDU, May 27: Cooperatives now have to invest at least 51 percent of their issued credit on production businesses, abiding with the unified directives endorsed by the Department of Cooperatives (DoC) on Thursday.

At a time when the cooperatives are being blamed for investing huge amounts in unproductive sectors including the realty businesses; the sector’s regulator has asked the cooperatives to limit their investment in such activities. As of now, over a dozen of cooperatives including Civil Savings and Credit Cooperative and Oriental Savings and Credit Cooperatives have been landed in trouble due to their overexposure on the land and housing businesses.  

In the new rules, cooperatives will have to maintain their non-performing loan to below 5 percent of their loan portfolio. Like the commercial banks, the cooperatives also need to maintain loan loss provision in any issued loan that tends to go into bad debt.

According to the DoC, the cooperatives have been mandated to maintain loan loss provision of one percent for all the issued credits. In case of doubtful loan in which a debtor fails to pay monthly installment for up to one year of the due date, the cooperatives have to maintain 35 percent in loan loss provision. For any loan repayment that crosses one year of the due date, cooperatives need to maintain 100 percent of the loan amount in loan loss provision.  

Likewise, the cooperatives have been barred from issuing loans to more than 49 percent of the board members and account supervisory committee at once. The cooperatives cannot charge interest rate at more than the reference rate of 16 percent. 


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