l) Restriction on loans made by multi state cooperative society other than a co-operative bank, shall not make a loan to a member on the security of his share or on the security of a non-member.
(2) notwithstanding anything contained in sub-section (1), a multi state cooperative society may make a loan to a depositor on the security of his deposit. Was the restrictions on loans amount less than the dollar limit? To address this question, you would need to know the participant’s vested account balance as of the loan date, and whether the participant had taken out loans prior to the date of the loan under review. Lenders create a form of concentration risk when they extend a significant amount of credit cooperative society to any one borrower or to borrowers who are related in a common enterprise. As such savings associations are subject to regulatory limitations on loans to one borrower (LTOB), as specified .Borrower lending limitations are a critical safety and soundness standard enacted by Congress to prevent federally insured banks and savings associations from placing themselves at risk by concentrating too great a portion of their assets in any single borrower. Prior repayments are applied to reduce the portion of the loan that did not exceed the limit. This means that none of the prior payments are allocated to the excess loan amount. The corrective payment for the excess loan amount is equal to the original loan excess, plus interest calculated by an association’s general lending limitation. You should utilize the most recent Thrift Financial Report filed with the OTS prior to the date of granting or purchasing the loan (unless there has been a significant change in capital). The general lending limit is 15 percent of unimpaired capital and unimpaired surplus, which are defined core capital and supplementary capital included in total capital, plus any Allowance for Loan and Lease Losses (ALLL) not included in supplementary capital, plus the amount in advances to subsidiaries not included in calculating core capital. Further, you shall visit reading and inspection of auditor's report.