The Cooperative Sector Reform Suggestion Task Force has recommended that the registration of savings and credit cooperatives be suspended for a one-year period in metropolitan cities, sub-metropolitan cities, and municipalities.
While there are more than 31,000 cooperatives in the country, the majority of those who’ve turned problematic are savings and credit cooperatives. Hence, the task force suggested the suspension of registration and extension of their work area.
“Through the amendment of some Nepal Acts, by amending the Cooperative Law, the registration of savings and credit cooperatives in metropolitan cities, sub-metropolitan cities, and municipalities, and permission to expand their scope of work should be stopped for one year,” reads the recommendation of the task force. The task force submitted the report to Prime Minister Pushpa Kamal Dahal on Monday.
Amid rising incidents of cooperatives turning problematic and misusing the depositors’ money, the government in the second week of May formed the task force headed by National Planning Commission member Jayakant Raut.
According to Raut, the task force has suggested freezing the bank accounts, immovable property, and passports of the directors of cooperatives that have turned problematic.
The task force has also suggested fixing the loan limit to be given to directors of cooperatives as well as members of the audit committee. It has also recommended that directors who've taken loans from their organizations should pay such loans within six months.
Depositors have lost billions of rupees due to the lack of effective regulation of savings and credit cooperatives by the government. In the absence of effective regulation, deposits worth billions of rupees are at risk as several cooperative operators indulged in reckless investments.
According to the Department of Cooperatives, problems have been observed in about 100 cooperatives. Although the department does not have a definite data, billions of rupees of depositors have sunk in those cooperatives.
Depositors have not got back Rs 14bn from Shiva Shikhar Multi-purpose Cooperative. Kedar Nath Sharma, the former president of the cooperative has been recently arrested by the police from India.
Similarly, Dev Kumar, director of Image Savings and Credit Cooperative, is absconding after defrauding depositors’ money worth Rs 2.5bn.
According to government data, there are 30,879 cooperative institutions across the country. These cooperatives’ total share capital is Rs 94bn while their savings stand at Rs 477bn. Their loan disbursement is estimated at Rs 426bn.
