KATHMANDU, Dec 27: National Cooperative Bank Limited (NCBL) has set up a liquidity management fund worth Rs 2 billion, citing to help those cooperatives facing the problem of liquidity crunch.
KB Upreti, chairman of the NCBL, said they have endorsed a working guideline to utilize the money in the fund to avoid possible shortage of loanable funds in the cooperatives. “By utilizing the fund, we will be providing collateral free loans up to Rs 10 million to the cooperatives that are in need of money to lend in production businesses,” said Upreti.
Currently, Nepal’s banks and financial institutions (BFIs) have been facing liquidity crunch due to excess lending compared to low deposit collections. As a result, almost all the banks have crossed the limit of 90 percent of the credit-deposit (CD) ratio.
In the past few weeks, cooperatives have also started facing a problem of cash shortage to provide loans. According to Minraj Kandel, president of the National Cooperative Federation of Nepal, the demand for loans in cooperatives has increased massively after BFIs have been unable to issue adequate amounts in loans to their clients.
Nepal’s cooperatives have been mobilizing an estimated around Rs 500 billion deposits of their members. However, there is no strict mandatory framework to track the deposits lending of the cooperative businesses as the ones being imposed for the BFIs.