COLD WAVE HITS THE COUNTRY THIS WEEK Kathmandu, 13 Dec. A cold wave swept the country this week. Minimum temperature in the Valley Wednesday was 3.6 degrees Celsius. The minimum temperature 19.8 degrees Celsius. Dhangadi Tuesday recorded 2.4mm rainfall. Heavy snowfall was recorded in the Himalayan and hilly regions while thick fog disrupted flights in the terai . Nnnn SECURITY OF EASTERN REGION UNDER REVIEW Kathmandu, 13 Dec.: Officials began a one-day review of the security situation in the central region in Birgunj on Thursday. Home Secretary, Navin Ghimire, inaugurated the conference Crime along the border is being reviewed. CDOs and chiefs of Nepal Police and Armed Police of nine districts of Narayani and Janakpur zones along with Chief District Officers are attending Inspector General of Nepal Police, Kuber Singh Rana, Inspector general of Armed Police Force (APF) Kosh Raj Onta and dead of National Investigation Department, Moti Gurung are attending. The meeting is regular. Security in the mid and far-West was earlier reviewed in Nepalgunj. nnnn. TIME EXTENDED TO SELL STAR MALL TO RECOVER DEBTS Kathmandu, 13 Dec.: After failing to attract bidders for Putalisadak-based Star Mall, crisis-ridden Nepal Share Market and Finance (NSMF) has extended the bid deadline by seven days for the second time, Prithvi Man Shresths writes in The Kathmandu Post.. The finance company had first called the bid on November 24 and had extended the deadline on December 9 after no one applied. The sale of the shopping complex is must for NSMF to recover the money embezzled by its former chairman Yogendra Shrestha, who is currently in jail. Star Mall is promoted by Shrestha. The finance company is ready to sell the mall located at one of the prime locations of Kathmandu, provided the bidders quoted around Rs 900 million. The Nepal Rastra Bank (NRB) has valued the property at Rs 1.3 billion. Although the Citizens Investment Trust (CIT) was supposed to purchase the property, it is yet to decide on the matter due to high cost. “If the property could be sold at the price sought by NSMF, it will recover a big portion of the amount embezzled by Shrestha,” said Shyam Sundar Shrestha, senior manager at NSMF. Shrestha embezzled Rs 1.72 billion from the finance company by creating fake loanees, as per a due diligence audit (DDA) report. He created 96 fake loanees to take the loaned amount by himself. The company has so far been able to recover just Rs 150 million from Shrestha by selling his shares in Machhapuchhre Bank. The amount received from the sale of Star Mall will be first used to repay loans taken from Global Bank and Siddhartha Bank, where the property has been put up as collateral. These banks have invested over Rs 300 million in the mall. The finance company also recovered Rs 375.5 million deposited in Star Saving and Credit Cooperative. The amount was recovered after selling Shrestha’s shares in Himal Hydro, which were put up as collateral at Star Saving and Credit Cooperative. NSMF is also planning to sell Shrestha’s 24 annas of land at Kamaladi after completing Star Mall sales. As Shrestha owns enough property to recover from, both the finance company and the central bank have been saying NSMF depositors should not worry about their deposits. Ever since the exposure of fund misappropriation at the company and subsequently the company was declared crisis-ridden, NSMF has been able to recover a substantial amount of loans that went to other loanees, although it struggled to recover from Shrestha. As a result, it has been able reduce its liabilities to depositors considerably over the last year. When the fraud at NSMF was uncovered on May 9, 2011, the company had deposits worth Rs 3.12 billion and loans worth Rs 5.26 billion. But the company, as of a few days ago, has been able to reduce its deposit mobilisation to Rs 1.5 billion and lending to Rs 1.41 billion, according to the finance company. NSMF currently has 13,000 depositors. Despite the recovery of a huge chunk of loans, its financial status is yet to improve as it is still struggling to recover the amount misappropriated by Shrestha. When the finance company was declared crisis ridden on January 12, 2012, its capital adequacy ratio was negative by 5.73 percent which has now deteriorated further to 7 percent, according to NSM officials. “It is due to the conversion of a few good loans to bad over the period,” said NSM’s Shyam Sundar Shrestha. Declaring crisis-ridden, the central bank had given NSMF six months time to improve its financial health, but the former is yet to take further action. An NRB official said the central bank was in ‘wait-and-see mode’ as the company is in the process of selling Star Mall. Earlier, central bank had prevented Global and Siddhartha banks from auctioning the property, saying there were chances that the property fetched a better price if NSMF was allowed to sell the property itself. “The aim of central bank is to receive more amounts so that more depositors could be paid back their deposits,” said the central bank official. Nnnn COOPERATIVES LOOSELY REGULATED Kathmandu, 13 Dec.: Raising alarm bells for the regulators, deposits in poorly regulated cooperatives have grown much higher than that in B and C class financial institutions, Raaaaajesh KHanl writes in The Kathmandu Post.. The Department of Cooperatives’ (DoC) statistics show cooperatives across the country had deposits worth Rs 139.54 billion at the end of the last fiscal year. And, development banks and finance companies had deposits worth Rs 127.30 billion and Rs 76.11 billion, respectively. The DoC statistics clearly suggest where the money is going. In the last fiscal year, cooperatives’ deposits grew by a whopping Rs 22 billion. The surge in cooperatives’ deposits, according to bankers, poses risk to the financial sector as they are not properly regulated. Bankers attribute the massive growth in cooperatives’ deposits vis-à-vis development banks and finance companies to a decline in banks’ interest rates and troubles at a few development banks and finance companies. Surge in the number of cooperatives and the high interest rates offered by them also contributed to the rise in their deposits. Development banks and finance companies are regulated by the Nepal Rastra Bank (NRB), which carries out timely supervision and monitoring. Despite NRB’s strong eyes, these financial institutions have landed in troubles, especially in last three years. NIC Bank CEO Sashin Joshi termed the enormous rise in deposits of cooperatives ‘alarming’. “The massive rise in deposits of the poorly regulated cooperatives sector poses a big challenge for the country’s financial system,” said Joshi. In the absence of an all-powerful regulatory body like the central bank to monitor cooperatives, there are fears that public deposits might be at risk, with most of the cooperatives not following prudential financial norms. The recent case of the country’s two largest cooperatives—Oriental and Guna—struggling to payback depositors’ money justifies this fear. As of now, there are 26,501 cooperatives across the country, including 11,851 saving and credit cooperatives. With the government prioritising the cooperative sector as one of the three pillars of the economy, there has been an impressive surge in the number of cooperatives in last fiscal year. In fiscal year 2011-12, 3,200 new cooperatives were opened, including 854 saving and credit cooperatives. Most of the deposits are with saving and credit cooperatives. Such cooperatives hold Rs 109.94 billion—10 percent of the total deposits in A, B and C class banks and other financial institutions. Most of the problems seen in the cooperative sector are related to saving and credit cooperatives. According to the DoC study, cooperatives are being run as family business , with family members working as directors and audit committee members. The study also showed cooperatives are transferring fixed assets like land, buildings and shares taken as collaterals in the name of board members or other companies they have promoted. Bankers say given the size of deposits that cooperatives hold, their regulation has become a must. “There has to urgency on the part of the government to regulate cooperatives,” said Joshi. NRB Spokesperson Bhaskar Mani Gyawali highlighted the need for timely regulation of large cooperatives with big deposit base. “There is a need for a second tier regulator to regulate these cooperatives,” said Gyawali. As per the Cooperative Act, the Cooperative Department is only the authorised agency to suggest cooperatives if it finds any of them breaching the Act. But with limited staff, the department is struggling to efficiently monitor cooperatives. Amid growing anomalies in the sector, the government, of late, has started homework on regulating cooperatives. The Ministry of Cooperatives and Poverty Alleviation (MoCPA) is currently doing homework on formulating a new regulation that is expected to help track the working of cooperatives, mainly based in the urban areas. “We have started discussions with stakeholders related with to saving and credit cooperatives for the purpose,” said Rana Bahadur Shrestha, secretary at the MoCPA. The new regulation is expected to trail whether cooperatives are working as per their bylaws. The regulation will mainly target the reporting system of saving and credit cooperatives in a more effective way. “It will help look after issues like whether they are conducting annual general meeting on time, regular meeting of shareholders, and reporting the authority on their financial transactions on a regular basis,” said Shrestha. The MoCPA has forwarded the draft of the National Cooperative Policy 2012 to the Cabinet for approval. The proposed policy talks about strict monitoring of saving and credit cooperatives, encouraging mergers and encouraging cooperatives federations and associations for monitoring of their members. Nnnn MESSI EXTENDS RECORD Kathmandu 13 Dec.:: Lionel Messi extended his record for goals scored in a year on Wednesday as the Argentinian maestro scored both Barcelona´s goals in their 2-0 win away at Cordoba in their Spanish Cup Last 16 first leg clash, AFP reports from Madrid. The 25-year-old three-time Ballon D´Or winner struck in the 11th minute, after being set up by David Villa, and then in the 74th when he ran onto an Alexis Sanchez pass to score to give the holders a handy advantage to take back to the Camp Nou for the second leg in January. The brace took him to 88 for the year, three more than German legend Gerd Mueller, although earlier on Wednesday Brazilian side Flamengo suddenly piped up to claim that Zico should be the holder with 89 goals in 1979. While Messi can do no wrong, his compatriot Marcelo Bielsa can do little right as his Athletic Bilbao side exited the competition at the hands of third division Eibar in their delayed last 32 second-leg match. Bilbao went out on the away goals rule as last season´s finalists were held 1-1 at home by their modest opposition. It is a far cry from last season when Bielsa - a former Argentina national coach who guided the Argentinians to the 2004 Olympic title - received great praise for the stylish football his young side played and which saw them also reach the Europa League final. Eibar´s reward is a last 16 clash with Malaga with the first leg next Wednesday. nnnn