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Company News
Promoters flee with money, 4 co-ops facing action
Thursday - 29th December, 2011 | www.myrepublica.com |
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The government has initiated action against four Kathmandu-based cooperatives after their promoters fled with depositors´ money.
The four cooperatives in question are: Grace Multipurpose in Chabahil, Kamalin Savings and Credit in Tripureshwor, Demand Savings and Credit in Min Bhawan and Gaganchuli Savings and Credit in Gongabu.
"These institutions stopped operations without informing the authorities as the promoters of these institutions disappeared with clients´ money," Krishna Prasad Sharma, a senior official of Kathmandu Division Cooperative Office (KDCO), told Republica, informing only one such case was reported last fiscal year.
"We have already asked the police to issue arrest warrants against them so that necessary action can be taken," Sharma said.
The news comes at a time when it is feared that a number of financial institutions, with exposure to the real estate sector, may go bankrupt, as many borrowers, who had obtained credit to purchase land and houses, are said to be defaulting on their loans.
"As of now, we do not know whether the cooperatives in question had accumulated bad debts because of the exposure to the real estate sector, as they have not submitted audited balance sheets of the last few years," Sharma said. "Under such circumstances, these cases can only be referred to as cases of moral hazard in which promoters gobble up depositors´ cash because of greed or financial problems."
One of the biggest problems faced by the cooperative sector is delay in compilation of audited balance sheets, because of which the true financial condition of these institutions is not known to many.
For instance, 22 percent of 528 cooperatives operating in Bhaktapur district have failed to get their balance sheets of last fiscal year checked by auditors so far.
"We will soon initiate the process of scrapping the license of these cooperatives if they fail to heed to our calls," Hari Basista, chief of Bhaktapur Division Cooperative Office, told Republica.
The situation is the same in Lalitpur, where Lalitpur Division Cooperative Office, has already started the process to terminate the operating licenses of three cooperatives.
As per the new government regulation, cooperatives must audit their books of the previous year and hold annual general meetings within first three to six months of every new fiscal year. "But only a few cooperatives followed this rule," Sharma admitted.
Because of this, the KDCO does not have exact statistics on the volume of credit and deposits handled by four cooperatives that are under its scanner. The officials could only say Grace had maintained an annual transaction of Rs 40-50 million, while the rest had annual transactions of below Rs 10 million. |
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