The government on January 25 formed an eight-member committee under Nepal Rastra Bank (NRB) Deputy Governor Maha Prasad Adhikari after cooperatives like Oriental, Exim and Guna faced severe liquidity crisis and failed to return depositors´ money.[break]
The committee, formed through a cabinet decision, was asked to identify problems faced by troubled savings and credit cooperatives and lay necessary recommendations within a month´s time.
Although the deadline to submit a report expired long ago, the committee has asked the Ministry of Cooperatives and Poverty Alleviation to give it until mid-July to complete its task. The ministry has already approved the proposal but the cabinet is yet to give a nod.
So far, the committee has identified 33 savings and credit cooperatives as troubled, a high-ranking NRB official told Republica without revealing names.
“But apart from collecting names of troubled cooperatives nothing much has been achieved,” the official said. “This is because many cooperatives failed to provide information that we sought. And since the Department of Cooperatives and division cooperative offices also did not have data that we were looking for we could not proceed ahead.”
Many financial cooperatives have been flouting simple rules such as bar on deposit collection in excess of 10 times the amount of paid-up capital. A look at balance sheets of savings and credit cooperatives also show credit portfolio surpassing deposit portfolio, meaning more than what these institutions are collecting as deposits are being extended as loans.
Despite being aware of these mismatches division cooperative offices do not seem to be taking action.
Officials at the Department of Cooperatives told Republica that instructions to cover holes on balance sheets are issued every now and then. “But very few heed our commands.”
What is worse is that division cooperative offices cannot take legal recourse on their own unless members of cooperatives file written complaint against promoters. This means cooperative offices cannot do anything even if they are convinced about fall of cooperative unless members file complaints.
This is because the law assumes no foul play in the cooperative sector. And because of this the law does not have provisions for huge fines and harsh punishments against those who commit crimes.
This is evident from maximum fine of mere Rs 1,500 that authorities can slap on cooperatives that fail to abide by the law. And in extreme case, division cooperative office can dissolve a cooperative-a provision which will not give relief to victims if a cooperative does not have valuable assets.
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