Following the footsteps of the central bank, Department of Cooperatives is issuing the first ever financial directives, asking the saving and credit cooperatives to limit their housing and real estate credit to 15 percent of their total loans portfolio by the end of this fiscal year. [break]
"The directives will be enforced in a day or two," a highly-placed government source told Republica.
Once the directives come into effect, the saving and credit cooperatives will have to lower their real estate loans to 10 percent and housing loans to 15 percent by mid-July 2010.
Also, the cooperatives will need to slash their Credit-Deposit (CD) ratio to 85 percent by this fiscal year end and further cut it down to 80 percent by the end of the next fiscal year.
According to an estimate, saving and credit cooperatives operating in the urban areas hold as much as Rs 70 billion in the form of deposits of their members, and two-third of the money has been invested in the housing and real estate business.
"Cooperatives are the major financer in the sector. If the government forced them to slash their loans exposure in the realty business to 25 percent, they will have to rapidly pull back their investments. This will bring hue and cry among their clients," said a land dealer.
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