Nepal Rastra Bank has prepared separate guidelines and draft standards for the regulation of savings and credit cooperatives. Nepal Rastra Bank has prepared a draft for the regulation and supervision of the cooperative regulatory authority which is about to be established. A draft has been placed on the Rashtra Bank website so that suggestions can be made by the end of January.

  In the

draft, the cooperative organization dealing in savings and loans must maintain a spread of 6 percent between loans and deposits, maximum of 90 percent of the total deposits can be given as loans, no more than 3 lakh loans can be given without collateral, transactions outside of members cannot be made, above 10 lakhs Various arrangements have been made, including the mandatory disclosure of sources in the business, and not being allowed to invest in shares and real estate except for government bonds.  In the

draft, there is a provision that the organization cannot make loan investments to members who have not completed their membership for at least 3 months. A cooperative organization cannot provide loans exceeding a maximum of 15 percent of the primary capital fund per member. The organization can provide an unsecured loan to a member who is saving regularly up to 5 times or more than 3 lakhs, whichever is less. In this way, while granting unsecured loans, at least two members will have to take surety," the draft says, "The administrator will not be allowed to take any additional loan except for the loan received for the protection of his savings. The organization can invest in shares of licensed cooperative banks and small farmers microfinance institutions and bonds issued by the Government of Nepal. Apart from this, it is not allowed to invest in shares/debentures of any other organization.' 

The organization has been operating continuously for three years with net profit, there is no accumulated loss and the minimum capital fund is maintained, a land-building for office purposes equal to a maximum of 25 percent of the primary capital or a maximum of 50 percent of the reserve fund (whichever is less) There is a provision in the draft that can be procured/constructed transparently. If the property is purchased/constructed contrary to the above conditions, the equivalent amount will have to be deducted while calculating the primary capital fund. There is a provision in the draft that when buying/constructing property, it should be done only by a decision of at least 51 percent majority of the general assembly and information about the purchase/construction of property should be given to the regulatory body within 30 days.

Institutions dealing with large transactions, except for specialized institutions, must transfer at least 50 percent of the total loan to productive sectors including agriculture, industry and business operations/expansion. It is mentioned in the draft that this limit should not be maintained until the end of June 2083. There is a provision to provide appropriate grace period for payment of installments/interest while disbursing loans for agriculture, industry and business.

Co-operatives have imposed limits on mortgage valuations when investing in real estate mortgages. The organization will be able to provide loans up to 90 percent of the member's savings. The organization can provide loans up to a maximum of 50 percent of the mortgage valuation in metropolitan/sub-metropolitan cities and up to 60 percent in the case of mortgages in cities/villages when providing loans on mortgage of immovable property. The

organization will only provide loans to the borrower himself or his family will have to Before the issuance of this directive, there is a provision in the draft to regularize the loans of third parties other than the mortgage of the member himself or his one-house family by the end of June 2083. The organization can disburse loans up to 80 percent of the total project cost in installments only to the borrower member under the protection of the project. 

'The organization will not be allowed to issue loans against the shares of its members,' it is said in the draft, 'When the organization takes a loan from another body by keeping the borrower's property as a mortgage, the borrower will not be allowed to borrow more than the loan amount taken from the organization.' Provisions to be made against bad loans are mentioned in the draft.  The loans disbursed by the

organization should be classified as follows based on the installment/interest payment period and provision for bad debt losses should be made according to the classification of loans. It is mentioned in the draft that the organization should maintain at least 15 percent of the total savings obligation as liquid assets.

There is a provision in the draft that should be implemented by the board of directors of the organization in relation to the interest rate, interest calculation method, compensation method and administrative service fee to be given and borrowed from the savings collected from its members. No fees other than administrative service fee, interest and compensation interest can be charged while disbursing the loan, but the service fee can be charged only up to the cost of other institutions/organizations such as credit information center limited for member debtors The details of the capital fund must be submitted to the regulatory body within three months of the implementation of the directive. If the organization's primary capital ratio and capital fund ratio are not enough, there is a proposal in the draft to submit an action plan so that such ratio can be maintained by the end of June 2083. Arrangements have also been made to monitor the capital fund on the basis of the last quarter's balance sheet and profit-loss statement certified by the Accounting Supervision Committee.