The Ordinance has amended the Cooperative Act to curb the financial transactions carried out by unions. The ordinance clearly states. "Notwithstanding anything contained elsewhere in the ordinance, cooperative unions shall not be allowed to carry out the business of savings and credits. Provided that, at the time of the commencement of this sub-section, the co-operative unions carrying on the business of savings and credit shall cease the transaction within three years from the date of commencement of this sub-section. ’
With the implementation of this provision, the cooperative unions at the upper level, district, state or central level, except for the primary cooperatives, will have to completely stop collecting savings and investing loans within 3 years. In the past also, the government had brought an ordinance to amend the Cooperative Act. But the ordinance was silent on the financial transactions the unions.
Similarly, the ordinance envisages tightening the regulation of the cooperative sector. The ordinance seemingly strengthens National Cooperative Authority. Now, institutions with total savings or loan investment of more than Rs 250 million or having savings and loan transactions of more than 50 percent of the total assets will have to mandatorily obtain an operating licence from the authority. Such institutions currently in operation will have to obtain such a licence within one year from the date of commencement of this ordinance.
In recent days, co-operative operators fleeing with the money of depositors has increased. To curb such trend, the ordinance has provided for strict punishment. The Authority has been given the power to freeze the movable and immovable property in the name of the director, employee or their family members who do not return the savings amount or cooperate in the investigation and also ban them from traveling abroad (passport freeze). If necessary, such people can be arrested with the help of the police and action can be taken. The Ordinance has also further broadened the definition of relatives and family members of the cheating operators.
The government will set up a circular relief fund to provide relief to the depositors of problematic declared cooperatives declared.
Such a fund will be set up by incorporating the amount provided by the Government of Nepal, the amount returned as reimbursement from the concerned institution and the amount received from other sources. The government can provide immediate relief to the depositors from such a fund until the management of the assets of the problematic institutions and recovery is made. Later, the amount recovered from the auction sale of the property of the director or borrower will be gradually reimbursed in the fund. The ordinance brought to make the cooperative sector transparent and reduce financial risk is going to come into effect immediately.
