Kathmandu. The government has tightened the loan investment of cooperatives.
The Department of Cooperatives under the Ministry of Land Management, Cooperatives and Poverty Alleviation has issued the Unified Directive, 2082 BS. Now, while investing more than Rs 300,000 in loans, cooperatives have to invest individual and collective money only by depositing or mortgaging.
Similarly, a provision has been made to invest at least 50 percent of the total loan in production and income-oriented businesses by classifying the sector of the loan. While determining the interest rate, the co-operative society has to maintain the reference rate not exceeding the interest rate fixed by the Department of Cooperatives and the spread rate should not exceed 6 percent.
According to the directive, the non-performing loan (NPL) of the co-operative society will now have to be kept less than 5 percent of the total loan. The loan disbursed by the cooperative society should be classified as active loan and passive loan on the basis of installment-interest payment period and provision of loan loss fund should be made.
Similarly, the co-operative societies will now have to provide 1 percent for (good) loans disbursed to protect the savings of the members, 25 percent for loans that have exceeded three to six months, 50 percent for loans that have exceeded 6 to 12 months (doubtful) and 100 percent for loans that have exceeded 12 months (bad).
Without making these arrangements, the cooperatives will not be allowed to distribute any kind of dividend by showing profit artificially. If distributed, such amount will have to be recovered from the board of directors and managers and deposited in the reserve fund.
According to the guidelines, cooperatives should maintain less than 5 percent of the total assets including real estate, equipment, office goods, cash, pesky, current accounts, etc. According to the existing law, non-banking assets recovered through the auction process will have to be provided with 100 percent loan loss fund for the time being and converted into liquidity as soon as possible after six months.
