Directive Issued by Nepal Rastra Bank to Cooperative Societies holding a Limited Banking Transaction License: 2002

This is a directive issued by the Nepal Rashtra Bank to the cooperative societies holding a limited banking transaction license. It contains prudential provisions for carrying out financial transactions in an integral and secure manner.

The directive consists of six chapters which state the following:

• Interpretation of the application of the directive and definitions of the common terms;
• Description of the requirements of share capital to carry out financial transactions;
• Direction to the cooperative societies to make adequate provision for Capital fund based on the risk weighted assets;
• The norms for financial resource collection with regards to collection from member depositors of cooperative societies;
• Guidelines for minimum cash reserve and liquid assets that a cooperative society has to maintain against its overall liabilities and the implications for failing to do so;
• Issues relating to institutional governance and management of the cooperative society.

The other sections of the paper lay out provisions on:

• Credit limit and interest rate;
• Loan loss and loan classification;
• Investment and valuation.