”The liquidity crunch in the banking system and the economic slowdown have affected the recovery of cooperative loans, making it difficult for savers to repay their funds on time,” the second financial sector development strategy states.
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The Second Financial Sector Development Strategy has pointed out that due to the economic recession, the recovery of loans from cooperatives has been affected, making it difficult for savers to return their money on time. While savers of cooperatives have not been able to get their money back for a long time, the Second Financial Sector Development Strategy has also stated that due to the non-recovery of loans from cooperatives, the money has not been returned to savers on time.
The recently released Financial Sector Development Strategy (Fiscal Year 2082/83–2086/87) by the Ministry of Finance states that the inability to return the money of cooperative savers is due to the lack of liquidity in the banking system and the economic recession, which has affected the recovery of cooperative loans, making it difficult for savers to return the money on time. However, liquidity has accumulated in the financial system for the last three years.
For liquidity management, the National Bank is continuously withdrawing money from the market two days a week, on Sundays and Wednesdays. After the liquidity did not decrease due to the short-term withdrawal of money, it has withdrawn 200 billion rupees through one-year Rastra Bank bonds. However, the country's second Financial Sector Development Strategy mentions that there is a lack of liquidity in the financial sector.
'The lack of liquidity in the banking system and the economic recession have affected the recovery of cooperative loans, making it difficult for savers to return the money on time,' the second Financial Sector Development Strategy states. The strategy states that there is a serious problem of good governance due to the non-compliance with the principles of cooperatives and the influence of limited interest groups in management. ‘Financial risks have increased due to savings and credit cooperatives not showing accurate details of bad loans and not providing adequate funds for loan losses,’ the strategy states. ‘In the federal system, regulatory bodies are divided into three levels, which makes it difficult to obtain integrated data and regulate effectively.’ A debt recovery tribunal has been formed for the cooperative sector.
Although the tribunal has started its work, the amount has not been recovered, said Kirti Bahadur Basnet, chairman of the Cooperative Debt Recovery Tribunal. ‘So far, 238 cases have been registered. Of these, only 7 have been settled so far. Two small amounts have also been reconciled. Only 2.3 lakhs have been recovered from the reconciliation,’ Basnet said. ‘The rest are waiting for the review deadline before being recovered. After the deadline, it will be processed.’
Although there is no problem in recovering loans with sufficient collateral, Basnet said that there is a problem in how to recover in cases where there is no collateral. ‘In cases that are in the implementation stage, collateral has been double-frozen. First, there is a situation where the bank and financial institutions have double-frozen and then the cooperative,’ he said, ‘However, in cases where there is collateral, there will be no problem in recovering.’ The Cooperative Debt Recovery Tribunal has started its work since last Ashar. In which, only 5 cases were registered till Chhath and only after that, other cases have been registered. He said that the number of those cases is reaching and the progress is increasing.
Although there is a provision in the Cooperative Act to establish a Savings and Loan Protection Fund, it has not been implemented. ‘There is a provision in the Act regarding the affiliation of cooperative institutions to the Credit Information Center. Since detailed regulations and procedures are still in the process of being developed, a concrete amount could not be obtained,’ the strategy states.
The Ordinance on Cooperatives (current Cooperative Act) issued in December 2002 (2002), stated that savings of up to five hundred thousand rupees deposited by members of a cooperative organization declared problematic would be paid as a first priority. In this regard, in the case of savings of more than five hundred thousand rupees deposited by members, the concerned organization was prepared to make a standard and pay the member's savings proportionally if it was not possible to pay at once. But that arrangement has not yet been implemented.
The National Cooperative Regulatory Authority has also been established as per the provisions of the same act. The authority is currently calling for cooperative registration. However, the savers of the cooperatives have not been able to get their money back. The management committee of the problematic cooperatives has returned the money to the savers of some cooperatives. However, as per the provisions of the act and the plan put forward by the previous government, savers who had saved less than five hundred thousand rupees have not been able to get their money back.
‘For the purpose of returning the depositor’s money, the cooperative organization or the management committee pursuant to Section 105 of the Cooperative Act may sell the property of such organization or the collateral taken while providing the loan,’ the Cooperative Act stated. ‘Before selling the collateral taken while providing the loan by the cooperative, the concerned borrower shall be given time to repay the loan of the cooperative organization and if the loan is not repaid within that period, such collateral shall be sold at auction.’ The Act provides that if the amount received during the sale of such collateral exceeds the amount due by the borrower, the remaining amount shall be returned to such borrower.
