New co-op bill seeks stern penalty for funds misappropriationThe new Cooperative Bill has put in place a provision of stringent penalty against promoters involved in misappropriation of depositors money.
The new Cooperative Bill has put in place a provision of stringent penalty against promoters involved in misappropriation of depositors money.
The bill has provisioned a maximum of 10-year imprisonment, recovery of embezzled amount and equivalent fine. As per the existing law, the Department of Cooperative can only fine up to Rs1,500 for wrongdoing.
In order to discourage the trend of issuing loans to directors and their kin by creating fake loanees, the bill has provisioned 10 years of jail if done so and the loan becomes unrecoverable. Those embezzling more than Rs1 billion will have to serve eight to 10 years in jail.
As per a report of High Level Commission formed to probe irregularities in cooperatives, the promoters have embezzled a total of Rs11 billion. Half of the amount is related to Oriental Cooperative promoted by Sudhir Basent.
Shankar Adhikari, secretary at the Ministry of Cooperative and Poverty Alleviation, said stringent penalty provision has been necessary as promoters of about 133 cooperatives have embezzled more than Rs11 billion. “The current provision of just Rs1,500 fine does not deter cooperative promoters from committing financial crimes,” he said.
The penalty provision is in line with recently-introduced Act on Banking Offense Act which has also provisioned a maximum 10-year imprisonment for financial crimes.
The bill has also made a provision of declaring cooperatives crisis-ridden. If the cooperatives work against the interest of members and do not have the capacity to pay liabilities, and if they fail to return deposits and are towards insolvency, the government at the recommendation of the registrar of the Department of Cooperative can declare such cooperatives crisis-ridden.
Given the limited capacity, experience and expertise with the Department of Cooperative, the bill has provisioned taking active assistance of the Nepal Rastra Bank for supervising and regulating bigger cooperatives having transaction more than a certain amount. “The amount is yet to be fixed,” said Secretary Adhikari.
The bill also talks about involving the central bank in regulating saving and credit cooperatives and developing a special monitoring system for the purpose. The registrar can take NRB’s help for the purpose, the bill states.
As per the new bill, a cooperative bank to be formed to lend to cooperatives, has to take license from the central bank and will under the NRB purview.
Multipurpose cooperatives and other cooperatives related to certain sectors have been banned from carrying out savings and credit roles. If they are involved in such activities, they should convert themselves into savings and credit category in three years.
The bill also bans cooperatives from charging renewal fee and service charge while providing credit to members. It has also fixed 6 percent interest rate spread.
The cooperatives have also been banned from capitalising interest into principal and charge interest on it and from purchasing shares of any company.
“If one has already purchased, such shares should be divested within a year from the implementation of the new Act,” the bill states.
A cooperative can collect deposit only up to 10 times of its share capital.
If any cooperative violates the law, it will be fined Rs500,000, the bill states.