KATHMANDU, August 3: The National Cooperative Federation of Nepal (NCF) has cautioned cooperatives not to invest in unproductive businesses, citing the liquidity crunch seen in the cooperatives.
Issuing a press statement on Tuesday, the umbrella organization of cooperatives said many investors have been switching to cooperatives to take loans to invest in realty business after failing to get loans from banks and financial institutions (BFIs). Nepal Rastra Bank, through the monetary policy for fiscal year 2022/23 has tightened the BFIs’ investment in real estate while the central bank has also revised the margin on land as collateral to 30 percent from 50 percent.
DoC bars cooperatives from issuing loan to realty businesses
The NCF has come up with the public notice citing the recent case of Gautam Shree Multipurpose Cooperative, Kathmandu. The cooperative has been struggling to return around Rs 7 billion of over 25,000 depositors, which has been blamed on the cooperatives’ excess exposure to the realty business.
The NCF has requested cooperatives to prepare working guidelines of risk assessment and to implement effective measures to recover credit given to land businesses, in order to minimize the risks. “Cooperatives are requested not to invest in unproductive businesses till the situation is eased,” reads the NCF’s press statement.
