NATIONAL 4 - (Spotlight Weekly)

‘The Role Of Committee In Guiding The Policy Is Vital’

"Supervision Is Very Poor"

— Bibhuti Raj Pandey

BIBHUTI RAJ PANDEY, Chairman of Nava Chhitij Cooperatives, has switched to private financial venture after he retired from civil service. Pandey had also served as Director General at Department of Customs before retiring. He spoke to SPOTLIGHT on various issues of cooperatives and its challenges in Nepal. Excerpts:

After a long career in bureaucracy, what induced you to become a banker?

Well, my intention was not to be a banker. This is the reason when it was established, Nava Chhitij Cooperatives was just a cooperative and we did not intend to go for banking. It was only after we felt the need of money for investment, did we decide to opt for banking. So we applied to the Nepal Rastra Bank to get permission for the deposit collection. When I retired from the government service, my intention was to establish a multiple cooperatives.

What is the present status of your cooperative?

We started it in a very small scale with very small amount. When I took over as Chairman, the deposit of the cooperative was just Rs. 2000 and now it has reached to 150 million rupees. We worked very hard to accumulate such a large amount of deposit. We visited door to door to our relatives and friends insisting them to deposit in our cooperative. In one word, it was our own credibility that lured such a large sum. Most of the deposits we collected were through personal guarantee. We are not very ambitious and we have never encouraged for deposits of large amount. In the beginning, we did not accept deposits that exceeded half a million rupees.

We see that cooperatives are mushrooming these days, how do you see the future of such institutions?

Look, all the institution will not be successful. In the process of this tremendous growth, some of the cooperatives have already collapsed. One of the cooperatives that was permitted by Nepal Rastra Bank also closed down. There are two types of cooperative banks. Some cooperatives are given permission by Nepal Rastra Bank while others seek permission from department of cooperative. We have received permission from Nepal Rastra Bank. Many people are unaware about this difference. In such a competitive environment, only the best can survive in the long run.

What are the differences between cooperatives permitted by Nepal Rastra Bank and those by Department of Cooperative?

There are many differences. The cooperatives registered in NRB are more reliable as it guarantees the interest of depositors. Whereas the depositors may loose money in the cooperatives registered at the department. Cooperative Act also mentions clearly on what needs to be done.

How do you find the supervision from the concerned authorities?

It is very poor. Frankly speaking, there is virtually no supervision in the cooperatives. If you register under Nepal Rastra Bank, then the supervision is excellent. So far as the supervision of Department of Cooperative is concerned, they do not even know how to supervise. In Kathmandu district alone there are more than two hundred cooperatives. But the total number of staffs at the department is around half a dozen. How can they supervise? Last month, two teams visited our office to supervise. The team of Nepal Rastra Bank took nearly two months to complete the supervision whereas the Cooperatives staffs did it within two hours. Such was the difference. Cooperatives are places where money transactions take place. If there is no proper supervision on such institutions, ultimately the people may suffer.

How safe are our private banks and cooperatives for deposit?

I think in terms of loan collections, private banks and cooperatives are more efficient than the government owned banks. There is a rampant corruption at government banks. So far as the cooperatives and private banks are concerned, they demand more collateral against any investment. We recover what we invest. There are very few bad loans.

How do you find the foreign investment in this sector particularly the Indian investment?

Most of our local businessmen are displaced by Indian investors. The government must limit the areas of investment as we cannot compete with Indian and other foreign investors.

How safe is the public money deposited at the cooperatives and private banks?

It depends upon particular organizations. Some organizations are already in the process of collapsing due to mismanagement. There is no guarantor for the public money deposited at the cooperatives. Public do not have any place to complain if cooperatives collapse. This is the reason public have to be very careful in choosing the cooperatives. Since there is no legal provision to charge the promoters of cooperatives in case of liquidation of such company. It is the public themselves who have to judge which institutions are credible and which are not.

How do you see the new budget?

New budget has raised taxes for the cooperatives. Due to additional taxes the situation has become very difficult for us to compete with other financial institutions. Earlier, the cooperatives did not have to pay income and other taxes. Now they even have to pay corporate tax. Due to the imposition of new taxes, many cooperatives may close down. The profit margin is very low in cooperatives. So, we offer more interest rates than commercial banks. After the new tax proposition, cooperatives will not be able to lure depositors. Because cooperatives offer more interest rates, their profit margin is lower than that of banks. Now, we will have to face serious problems. How can we pay 30 percent tax?

As a person having such a long experience at the Finance Ministry, what do you make of the overall monetary situation?

Well, it is not good. Three to four years ago our recovery rate was very satisfactory. People used to pay back interest and loan in time. Now we are facing problems in recovering loans as business and industrial sector are also facing crises. When I joined the organization seven years ago, the recovery rate was quite good. But now, as the real estate continues to take downward turn and other small industries, too, are closing down, you cannot expect better recovery.

What about the political situation?

It is frustrating as political leaders are not acting in accordance with the wish of people. Although we have parliamentary system like in United Kingdom, our political leaders are acting in different manner. Political leaders visit their constituencies once in a blue moon and people can evaluate politicians in every five years. The political system needs to be revamped.

What do you think of the present process of registering cooperatives?

The process of registration is itself flawed. The cooperative department issues the registration as soon as they receive the application from a group of 25 people. The Department of Cooperatives issues license without even verifying the record. Since two cooperatives have already closed down, it is unknown where the depositors will have to go to get their money back. If the situation persists, within five years, there will be panic in cooperative sector.

What needs to be done, then?

The government must develop proper mechanisms to register cooperatives. It must have strong mechanisms for evaluation and observation of cooperatives. The cooperative department also needs to strengthen its institutional frame-work. The present situation is that a cooperative with Rs 25,000 capital investment is accumulating millions of rupees. The cooperative like ours are registered with Nepal Rastra Bank and we have to maintain our system at par with banking institutions. We have to deposit ten rupees with NRB for every hundred rupees of deposit we receive. There is no limit to collect deposit. As the cooperatives are not accountable to anyone, the day may come when cooperatives will collapse and people will be left stranded.

What is the present state of cooperatives?

Cooperatives are not functioning properly. Some cooperatives are even accumulating money through false assurances. I think there must be mechanisms in place to safeguard the public money.

How is the role Department of Cooperatives?

Department of Cooperative is like Bhansar Bibhag (Customs Department). There are very limited number of employees there. They simply cannot evaluate the property worth millions of rupees.

‘The Role Of Committee In Guiding The Policy Is Vital’

— Som Prasad Pandey

SOM PRASAD PANDEY, Chairman of Human Rights and Foreign Affairs Committee of House of Representatives, is elected to the House from constituency no 2 of Palpa district. This is his second term in the House. Pandey spoke to SPOTLIGHT on various issues regarding the role and functioning of the committee. Excerpts:

What is the role of Human Rights and Foreign Affairs Committee?

It is one of the very important committees in the House of Representatives. As human rights and foreign affairs are complex and sensitive issues, the role of the committee in guiding the policy is vital. I am very happy to say that the committee has played a prominent role in establishing National Human Rights Commission. I have been making every effort to activate the committee after holding the post of its chairman. We have taken many decisions on human rights. Our committee has also expressed its concern over the human rights violation in Maoist-affected areas. We have recently formed a human rights sub-committee to oversee incidents of human rights abuse.

What about the foreign relations?

On foreign relations front, our committee has already asked the foreign ministry to present its views on Bhutanese refugees, border problems and other issues of foreign relations. Due to the efforts of the committee, the nearly suspended Nepal-Bhutan ministerial level meeting has resumed. We organized interaction programs on the issues of border problems with India and called high level officials to express their views. The experts, government officials and representatives of different non-governmental organizations are also invited in the meeting of the committee.

How responsive did you find the foreign ministry?

They are very cooperative with us. The committee invites ministers and officials to present their views regarding the foreign relations issues. Whenever we ask them, the officials and the minister come to present their views. Foreign Minister Chakra Prasad Bastola was recently invited to brief us about his visit to India and Bhutan.

What is the committee's mode of evaluation of foreign policy?

We evaluate our foreign policies under national guidelines. We are very concerned whether the government is following non-alignment and Panchasheel principles or not. If we find anything inconsistent with these basic guidelines, we raise questions.

What problems has the committee identified related to issues of foreign relations?

Even after the restoration of democracy, many of the problems related to foreign affairs are yet to be settled. Whether it is the problems of Bhutanese refugees or unequal Nepal-India treaty of 1950, we have not been able to do anything. Along with the border issues, Kalapani is still one of the most complicated problems with India. We also asked the ministry officials to brief us about hijacking of Indian Airlines plane and its consequences.

How do ministers and officials take your guidelines and suggestions?

The officials and minister have always expressed their commitment to follow the guidelines and suggestions of the committee. Since the committee has members from different political parties, our suggestions are always based on national perspective.

Do you find the government serious to settle the problems in foreign relations?

I don't find the government very much serious to settle the problems in foreign relations. I have already told you that the problems like Bhutanese refugees, Kalapani and other border disputes have been pending for long. On Bhutanese refugees and other problems, the committee has already given clear guidelines and suggestions.

As a Chairman of parliament's foreign affairs committee, how do you view the foreign policy of Nepal?

Nepal's foreign policy should be based on Panchasheel and non-alignment. We must respect the integrity and sovereignty of two of our neighbors. On issues of Bhutanese refugees, we went to the refugees camp along with the delegation of European Parliament. As a sovereign parliament, we are very much sensitive towards the foreign policy matters. In some cases like in relations with India, China and other countries, we are not satisfied with the way the ministry is functioning.

Has the government informed you about the recent visit by the Principal Secretary of the Prime Minister of India?

Not yet. We are considering to call the foreign ministry officials to tell us about what they discussed with Indian officials.

What other works, does your committee do?

The Ministry of Tourism also falls under the committee. We have already directed Tourism Ministry on issues of lease purchasing aircraft for Royal Nepal Airlines.

It is said that the committee is showing unnecessary interest in the matter of lease purchasing of aircraft for RNAC. What do you say?

Our intention is not to stall the process of lease purchasing. Our demand is that there should be transparency in such process.

Can a committee direct the concerned authority without making final decision on particular issues?

We are not dictating on what they should do or not do. As a parliamentary committee, what we want is transparency in transaction of such big deals.

How effective is your committee regarding the discussion of bills?

One of the main roles of the parliamentary committees is to modify and correct bills presented in the parliament. We thoroughly discuss those bills which are referred to us by the House of Representatives.

But it seems that the committee is more concerned with other issues. Don't you agree?

Look, we divide our discussions in different aspects depending upon the urgency of the issues concerned.