Financial Sector Assessment Team of World Bank and International Monetary Fund (IMF) has asked the central bank to supervise big cooperatives as
Department of Cooperatives failed to regulate them due to its lack of capacity.
During an interaction with the central bank officials, the team also suggested the central bank to add a provision in Nepal Rastra Bank Act and Bank and Financial Institution Act (Bafia) – under class D financial institutions – to help it regulate big cooperatives.
In recent years, the cooperatives have become more vulnerable and have been misinterpreted to collect money from common people to invest in land, housing and stocks. The department that is entrusted with the right to monitor and take action against the foul players has failed to safeguard the depositors money and encouraged the cheaters and frauds deviating from the universal cooperative principle.
The team under the Financial Sector Assessment Programme has collected information about financial sector from different stakeholders, including regulators and financial institutions, and presented their initial assessment to the central bank.
The two institutions that have been helping central bank to protect the financial sector will give a final report in late June.
According to the latest data, some Rs 133.82 billion deposit of the general people in cooperatives is in risk due to lack of regulator and insurance.
Though the government has formed a commission to investigate the troubled cooperative that has received complaints against 70 cooperatives with around Rs 8 billion, the cooperatives are still cheating the depositors with the political patronage.
Currently, there are some 29,526 cooperatives – out of the total some 12,916 saving and credit cooperatives – as of last fiscal year. They mobilise deposit and flow loans like banks and financial institutions that are central bank regulated.
Despite strong monitoring and regulation, some banks and financial institutions are playing foul, the cooperatives has neither regulator nor monitor leaving the field open for frauds and cheaters.
Meanwhile, the visiting team also suggested the central bank powerful enough to liquidate troubled banks and financial institutions.The central bank seeking amending in the Bafia and Nepal Rastra Bank Act seeking the power to liquidate the troubled banks and financial institutions.