Speaking at an interaction on 'How to Make Risky transactions of Cooperatives Secure?' organized by Nepal Cooperatives Journalists Society (NCJS) in Kathmandu on Wednesday, government officials and cooperative activists said haphazard investment by the board directors without adhering to the cooperatives' norms and principles could invite crisis in cooperatives."When the Cooperatives Law was drafted in 1992, nobody thought about the fraud and crime in the cooperatives back then because the fundamental value of the cooperatives is honesty. Thus there was leniency in terms of punishment and penalty about the misdeeds of the cooperatives or its operators," Bishnu Ghimire, deputy registrar of Department of Cooperatives, said in the interaction.
"However, the public perception now is that the cooperatives are meant for looting. Many have entered into the cooperative sector with an ill intention and are exploiting the loopholes of the liberal cooperatives law," said Ghimire. He also said the regulatory agency lacks authority to check fraudulent activities in cooperatives.
Ghimire also said some leaders of cooperatives were against bringing new law that introduces strict punishment to cooperative fraudsters. "We have failed to introduce strong law which regulates the cooperatives that mobilize billions of rupees in deposits. Failure to check cooperatives' risky transactions may invite crisis," he added.
Though the government recently made amendment to the Cooperatives Law 1992 to provision stricter punishment and fine to the wrongdoer, it is yet to be enforced effectively as the amendment was made through ordinance.
The government amended the law following widespread complaints from experts and activists that the lenient treatment of offenders has been encouraging financial indiscipline and irregularities in many cooperatives which came to forefront after people lost deposits worth billions of rupees in more than 100 troubled cooperatives.
A high-level commission to probe troubled cooperatives, formed under Gauri Bahadur Karki in November 2013, has also suggested that the government introduce a provision for stricter punishment in the cooperatives law. According to the report of the Karki-led commission, as many as 12,962 people have filed complaints against 150 troubled cooperatives and made claims against them totalling Rs 10 billion, including Rs 7.6 billion in principal and Rs 2.4 billion in interest. The highest claim for deposits is Rs 5.5 billion against Oriental Cooperatives, which was promoted by Sudhir Basnet.
However, Nani Babu Budhathoki, Treasurer at Nepal Federation of Savings and Credit Cooperative Unions Ltd (NEFSCUN), pointed out haphazard issuance of license by DoC for growing distortions in cooperatives sector. "License of cooperatives was distributed haphazardly without considering that more than one cooperative should not be allowed in the same working area. Many of such cooperatives are operating against the principles of cooperatives. They have created problems," he added.
Likewise, Tek Bahadur Chaulagain, chairperson of District Cooperatives Association, Kathmandu, said that the fraudulent activities of some cooperatives should not be generalized. "Many troubled cooperatives like Oriental worked like a money collection center to pour investment into housing and real estate sector. Such problems are decreasing thanks to growing awareness among public," said Chaulagain.
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