New Cooperatives Act being prepared to tweak sector

THE National Cooperative Development Board (NCDB), in coordination with the Ministry of Cooperatives and Poverty Alleviation (MoCPA), has been drafting a new cooperative act in a bid to fine-tune the sector. After the act is enforced, it is expected to regulate the cooperative sector more effectively and prevent malpractices by the operators, particularly of savings and credit cooperatives. According to the NCDB, the new act will decentralise authority to the concerned agencies of cooperatives which is now held solely by the registrar of the Department of Cooperatives. The draft is being prepared by a seven-member committee headed by the NCDB co-chairman Saroj Kumar Sharma. The other members of the committee are the chairman of the National Cooperatives Association and representatives of the MoCPA and Nepal Rastra Bank. Sharma said the new act has envisioned appointing district cooperatives registrars who would look after the sector at the local level. According to him, the Cooperatives Department will act as the central authority which will operate under the MoCPA. “Apart from other provisions, the act will also specify the role of the MoCPA in governing the sector,” he said. “It has also planned to give the authority to declare cooperatives that do not perform well crisisridden to the ministry.” Similarly, the central associations and district associations of cooperatives will be authorised to monitor the concerned cooperatives. They will also provide training to the executives of individual cooperatives. Currently, the sector is being regulated under the Cooperatives Act 1992. Sharma said the act had failed to regulate the sector properly as the number of cooperatives has soared in the past two decades. “The number of cooperatives has exploded from 800 then to over 27,000 now,” he said. The necessity for a new act was also felt as the cooperatives sector possesses huge deposits but has a lax regulatory mechanism. As a result, the executives of a number of savings and credit cooperatives in particular have been found to have engaged in malpractices putting the money of the general public at risk. Citing weak provisions in the current Cooperatives Act with regard to controlling malpractices, a high-level committee formed last year had also recommended bringing a new act to govern the sector. The new act is expected to control the mushrooming of savings and credit cooperatives. At present, there are more than 11,000 savings and credit cooperatives. According to the records of the Cooperatives Department, there is a significant growth in the number of such cooperatives every year. According to Sharma, the new act has also planned to promote cooperatives related to the production sector that can create a large number of jobs. The multitudes of cooperatives in the country hold deposits amounting to over Rs 150 billion which is equivalent to 15 percent of the public deposits at A, B and C class banks and financial institutions. Savings and credit cooperatives have the bulk of these deposits. According to the board, the new act has also targeted insuring deposits of up to Rs 200,000 besides insuring loans. The act it is expected to regulate the sector more effectively and prevent malpractices by the operators, mainly of savings and credit cooperatives