Kathmandu. KATHMANDU: Nepal Rastra Bank (NRB) has issued ‘Directive for Cooperative Banks, 2082’. The directive was issued by the Bank and Financial Institutions Regulation Department in exercise of the powers given by Clause 79 of the Nepal Rastra Bank Act, 2058 BS.

KATHMANDU: Nepal Rastra Bank (NRB) has set a minimum paid-up capital of Rs 2.50 billion for a cooperative bank licensed to carry out limited banking transactions. Presently, the bank has a net worth of Rs 2.89 billion. Based on the total risk-weighted assets, the bank will have to maintain primary capital of 4.0 percent and total capital fund of 8.0 percent.

The central bank has said that this provision has been made with the goal of strengthening the financial health and good governance of cooperative banks. Failure to comply with the directives of the Nepal Rastra Bank (NRB) will result in fines and withholding of dividends.

Similarly, the loans issued by cooperative banks should be classified into four categories on the basis of the expiry period. In a good loan, you will have to make a 1% loss provision that has not been exceeded or exceeded the maturity for 3 months. It states that at least 3 to 6 months should be exceeded (25% loss provision).

The central bank has directed banks to exceed the threshold of six months to one year in case of suspicious loans and those who have exceeded the threshold for more than one year in case of bad loans (100% loss provision). The co-operative bank should maintain at least 2 percent of the total deposit (CRR) and 4 percent of the statutory liquidity ratio (SLR). The total liquid assets should be 20 percent. The spread rate of savings and loan should be less than 6 percent.

Similarly, cooperative banks are not allowed to invest directly or indirectly in shares or debentures of corporate institutions. However, they can invest in government securities and Nepal Rastra Bank bonds. The board of directors of the cooperative bank will have a maximum of nine directors including at least 33 per cent women members. The committee should have two independent directors (one banking expert and one cooperative expert) in the committee. Also, members of the same family will not be allowed to be the director and chief executive of the bank at the same time.

Now, the limit of loan÷loan that a co-operative bank can provide to a single member or a group of members has to be equal to 15 percent of the total assets of the member institution or 20 percent of the total ordinary shares of the cooperative bank, whichever is less. If there is no loan÷loan arrears within the limit, the cooperative bank will have to set the limit within the coming mid-July.

The co-operative bank will be able to issue loans up to Rs÷. 25 lakhs without collateral security against the collateral-free loan that will be approved and renewed after the effective date of this directive issued by Nepal Rastra Bank. The member borrowers have to use the loan issued by the bank only for the purpose of providing micro loans up to a maximum of Rs 5 lakh. The loan÷loan can be used only by the members of the bank other than the director.

The directive states that the bank may issue loan to its member borrowers cooperatives on the condition that they will provide loan in installment up to 80 percent of the total project value for the security of the project. The bank can provide loans up to 90 percent to protect the savings of its member institutions. The bank can issue up to 10 percent of the total loan÷loan in real estate and up to 25 percent of the total loan÷loan in both real estate and residential ÷home loan, subject to the prevailing laws and directives.