KATHMANDU, Sept 24: The Ministry of Finance (MoF) has suggested that the Department of Cooperatives (DoC) take immediate action against cooperatives found violating existing law.
The suggested action includes even cancellation of registration. MoF has also issued a work plan to execute its suggestion. The move comes in response to the findings of a study conducted by DoC at 25 big cooperatives operating in Kathmandu Valley, Kavre and Pokhara.
DoC submitted the report to MoF seven months ago.
MoF has suggested that DoC seek ways to stop cooperatives from making members pay service charges while issuing and renewing loans. Most of the cooperatives studied were found to have been slapping service charges from 1 to 3 percent even though the law clearly states that no service charge is to be levied. The study also found that cooperatives were violating regulations by not making provisions for loan losses.
DoC was advised that it strictly enforce the provision that cooperatives maintain a 6 percent spread rate - the difference between interests on deposits and loans - and take action against those found to have been collecting deposits amounting to 20 to 60 times their share capital. According to the existing provisions, cooperatives are not allowed to collect deposits more than 10 percent of their share capital.
Most of the cooperatives monitored by DoC were also found violating the law by issuing loans worth more than 10 percent of total capital reserves to a single member and engaging in transactions in shares, deposits and loans with ´unnatural persons´ -- companies or institutions.
The sternest action against those found violating the provisions while issuing loans to members is cancellation of registration. DoC was also advised canceling registration for cooperatives issuing long-term loans and long-term deposits, issuing overdraft and accepting gold and silver as collateral as such practices are against the Cooperatives Act.
Registration can also be cancelled for cooperatives issuing membership to those who are not residents of the command areas of the cooperatives concerned or opening branches in violation of cooperatives principles, and for cooperatives dominated by members of the same family.
MoF has said that cooperatives accepting deposits from non-members and issuing loans to them are cheating and has recommended strong action against them.
As some of the cooperatives were found to be involved in land business, MoF suggested that their registration be cancelled.
However, officials at DoC have said the suggestions could not be implemented as long as DoC is not equipped with sufficient resources and the legal authority to take action against wrongdoers.
“It is very difficult to implement MoF´s suggestions in the absence of budgetary and skilled human resources and sufficient legal authority as the number of cooperatives to be regulated and monitored by DoC is huge,” Sudarshan Dhakal, registrar at DoC told Republica. Dhakal said DoC has been demanding more quota for human resources, extension of cooperative offices across the country from the existing 38 districts, strengthening the capacity of the six centers for cooperatives training, and separate monitoring wings under DoC to regulate the cooperatives effectively.
http://www.myrepublica.com/portal/index.php?action=news_details&news_id=23624
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