 has released a draft directive aimed at regulating the savings and credit operations of cooperatives.){kind=link}
Nepal Rastra Bank (NRB) has released a draft directive aimed at regulating the savings and credit operations of cooperatives. The draft follows the government’s recent ordinance on cooperative sector management and seeks to enhance transparency, discipline, and fiscal stability in the sector.
Key highlights of the draft:
1. Savings Restrictions:
• Cooperatives can only collect savings from their members.
• Savings collection is capped based on the cooperative’s jurisdiction:
• Rs 1 million for cooperatives operating within a single district.
• Rs 2.5 million for cooperatives with operations in multiple districts.
• Rs 5 million for cooperatives with broader jurisdictions.
• Members must disclose the source of funds for deposits exceeding Rs 1 million.
2. Loan Regulations:
• Loans can only be given to members with at least three months of membership.
• Maximum loan per member is limited to 15% of the cooperative’s primary capital fund.
• Unsecured loans can be issued up to five times a member’s savings or Rs 300,000, whichever is lower.
• At least two members’ savings must be used as security for loans without collateral.
• Directors cannot take additional loans beyond the protection of their own savings.
3. Investment Limits:
• Cooperatives can invest in government bonds, cooperative bank shares, and small farmer microfinance institutions.
• Other investments, including in private shares or debentures, are prohibited.
• Real estate purchases are limited to 25% of primary capital or 50% of reserve funds, and only for office purposes, provided the cooperative has been profitable for the past three years.
4. Focus on Productive Sectors:
• At least 50% of total loans must be allocated to productive sectors like agriculture, industry, and business expansion.
5. Collateralized Loans:
• Loans secured by immovable property are capped at:
• 50% of collateral value in metropolitan and sub-metropolitan areas.
• 60% of collateral value in municipalities and rural areas.
6. Loan Restructuring and Rescheduling:
• Provisions for loan restructuring and rescheduling have been included to manage repayment flexibility.
NRB has invited suggestions and feedback on the draft by February 12. The proposed rules aim to curb risky practices like collecting savings from non-members and promote responsible financial practices in cooperatives.
This regulatory overhaul is expected to strengthen the cooperative sector and encourage investments in productive areas while safeguarding the interests of members and maintaining fiscal discipline.