New act to streamline co-op sector in offing
KATHMANDU, FEB 29 -
The Department of Cooperatives (DoC) has been working on a new Cooperatives Act to regulate the cooperatives sector following a series of malpractices by the operators, particularly of savings and credit cooperatives.
The new act will have strict provisions related to governance practices and give more teeth to the DoC, the regulator.
“There has been a sea change in the cooperatives sector over the last two decades as the number of cooperatives soared to more than 23,000 and cooperatives of different natures were established,” said DoC Registrar Sudarshan Prasad Dhakal. “We have to accommodate and address new areas that have emerged after the act was enacted.”
The necessity for a new act was felt as the cooperatives sector possesses huge deposits but has a lax regulatory mechanism. Considering the weak provision in the current Cooperative Act with regard to controlling malpractices, a high-level committee had recently recommended bringing a new act to govern the sector. The existing act was introduced some 20 years ago.
According to Dhakal, the new act will have provisions for an effective reporting system, liquidation and merger of cooperatives besides instilling a corporate culture and establishing insurance and stabilising funds to secure the money deposited with the cooperatives.
According to him, the department has hired a legal expert to work on the new act. “We plan to submit a draft of the act to the ministry within three months,” said Dhakal.
The burgeoning cooperatives are currently holding deposits amounting to around Rs 150 billion, which is equivalent to more than 15 percent of the public deposits at A, B and C class bank and financial institutions. Savings and credit cooperatives have the bulk of these deposits.
A study of big cooperatives conducted by the DoC in association with the Finance Ministry and Nepal Rastra Bank two years ago had shown that key promoters of cooperatives had been involved in a number of bad governance practices including running the cooperatives like a family business.
“The Cooperatives Act 1992 is mainly focused on promoting the number of cooperatives rather than on monitoring and regulation.” said Dhakal. “We are unable to control malpractices effectively as the laws are not strict enough.”
Many cooperatives have been ignoring the DoC’s directives for timely submission of their reports. The DoC has ordered cooperatives with annual transactions of more than Rs 50 million to submit their financial reports on a monthly basis.
Source: Kantipur
