KATHMANDU, May 21: The government has finalized the draft of Savings and Credit Cooperatives Act (SCCA) in order to regulate their operations and protect savings of small depositors.
The draft act has for the first time incorporates a provision, going by which the government can cancel registration of cooperatives and slap penalty up to Rs 200,000 and jail term of two years to promoters in case they were found involved in irregularities.
There was no law governing savings and credit cooperatives (SCC) so far. A separate act was prepared after recent inspections showed that SCCs were resorting to imprudent lending, exposing people´s savings to risk, due to the absence of law, prudential financial norms and poor supervision of the Department of Cooperatives (DoC).
Nepal Federation of Saving and Credit Cooperatives Unions (NEFSCUN) prepared the draft in consultation with the DoC.
Sudarsan Prasad Dhakal, registrar at DoC, told Republica that the draft act seeks SCCs to compulsorily insure deposits that they have mobilized. It also authorizes DoC to freeze accounts and property of any individual or institutional member of SCCs if investigation on organized crime or terrorist activities has to be launched against them.
The draft Act demands high integrity and corporate governance from the SCCs promoters and staff members and even makes them accountable for possible financial loss. In case any stakeholder is subjected to loss due to the promoters´ decisions, they will have to compensate for the loss.
"This provision has been incorporate to discourage growing impunity in SCCs," said Dhakal.
The act designates DoC as the regulator of SCCs. In case of foul play by SCCs, the act authorizes DoC to slap up to Rs 100,000 penalty even go to the extent of closing the SCCs depending on the severity of offences. It also provisions penalty ranging from Rs 25,000 to Rs 75,000 to SCCs if they are found providing loans to promoters or fail to call board meeting and annual general meeting within stipulated timeframe or submitted wrong information about the financial status. It also provisions similar penalty to auditors if they failed to perform their duty in a sincere manner.
The proposed act also empowers DoC to take management control of SCCs that are found violating its directives, failing to adhere to corporate governance norms and fulfill the institutional responsibility, thereby subjecting members and depositors interests to risks.
The act allows DoC to file a case at the appellate court to cancel registration of SCCs engaged in irregularities of severe nature or if they lack capacity for effective functioning even after management intervention.
The proposed act envisages a tribunal to settle cases related to the investments or deposits of the SCCs with high priority.
http://www.myrepublica.com/portal/index.php?action=news_details&news_id=31511
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