Currently, the cooperatives in the country are governed by Cooperatives Act 1992, which was formulated when cooperatives sector was only budding. [break]Today, the number of cooperatives in the country has reached close to 25,000 and many of them have annual transaction volume of billions of rupees.
“We hope the policy that we have drafted will address diverse issues facing the sector and provide a vision for its multidimensional growth,” Sudarshan Prasad Dhakal, joint secretary at the ministry, told Republica, confirming the draft policy was forwarded to cabinet on Thursday for final approval.
The draft policy, which was first prepared by the National Cooperatives Development Board in March, among others, has laid out plans to strictly monitor activities of savings and credit cooperatives, encourage mergers among cooperatives, restrict establishment of new cooperatives in areas that are crowded with such units and enhance coordination with different cooperatives federations and associations for monitoring of their members.
Acknowledging diversity of the sector, which has moved beyond pooling farmers and financial resources to set up agriculture-focused cooperatives or savings and credit cooperatives, the policy has proposed formation of cooperatives to promote tourism, communication, hydro and education sectors.
The activities of all cooperatives operating in the country will be monitored and regulated by the Department of Cooperatives, the draft policy says. At the same time, power will also be delegated to different federations and associations of cooperatives to monitor activities of their member units.
This means National Federation of Savings and Credit Cooperative Unions will be responsible for monitoring activities of its member savings and credit cooperatives, while other similar umbrella bodies will be responsible for tracking activities of their members.
“We are planning to adopt this practice as it has proved to be effective in many other countries. We hope this provision will also make cooperatives more professional and encourage self regulation,” Dhakal said.
One of the reasons why the government has proposed delegation of power to federations and associations of cooperatives is mushrooming number of cooperatives, which, it says, cannot be regulated by a single body.
Among these cooperatives, monitoring and regulating savings and credit cooperatives that operate like banks has proved to be a hard nut to crack as their number has swollen to around 12,000.
Since bankruptcy of these financial institutions can inflict huge losses on depositors, the draft has proposed formation of deposit guarantee fund and credit information unit under cooperative bank and cooperative association.
“In case cooperatives are found making transactions beyond stipulated limit, the concerned authority may ask them to meet additional standard,” says the draft, which has emphasized on good governance for sustained development of the sector.
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