Kathmandu. The government has unveiled a blueprint of multi-dimensional reforms to resolve the crisis seen in the cooperative sector through the ‘Good Governance Roadmap, 2082’.

The roadmap, released on Sunday, recommended restructuring the regulatory structure, tightening the law and implementing a technology-friendly monitoring system. The suggestion comes in the backdrop of billions of rupees stuck in troubled cooperatives across the country in recent times.

According to the roadmap, the government has given first priority to small savers. It has been proposed to immediately return the savings on priority basis through the ‘Savings and Credit Guarantee Fund’ by identifying the members of the troubled cooperatives who have saved up to five lakh rupees. For this, a public notice will be issued with a fixed time limit and a legal guarantee of deposit security will be given. It is stated in the road map that if the money is not returned from the recovered property, it should be guaranteed that up to five lakh rupees will be returned from the security fund.

The government has also put forward a plan to manage liquidity by issuing cooperative bonds, if necessary, to facilitate the repayment of money to small savers. Similarly, in the case of savings above five lakh rupees, it should be distributed on the basis of insolvency and a priority list of depositors should be prepared. A provision has been proposed to keep a legal check on other business transactions and income of the operators of the problematic cooperatives until the savings are returned.

The roadmap recommends more stringent provisions towards institutional reform. It has been proposed to scrap the existing cooperative department and create an autonomous ‘Cooperative Regulatory Authority’ with quasi-judicial and executive powers.

The authority will be given to the authority to freeze the passport of the guilty operator, freeze the bank account and property and seize and auction the personal property. The ministry has mentioned that only the cooperative division will be kept for policy work.

Similarly, a separate dedicated task force would be formed for each problematic cooperative and a permanent structure would be set up in the ‘Asset Management Company’ model for asset management. In addition, experts in financial analysis, forensic audit and cyber regulation will be mandatorily appointed in the regulatory body.

Another important recommendation of the roadmap is to reclassify the jurisdiction of cooperatives as per the federal structure. Based on the transaction amount of cooperatives, local level will have jurisdiction up to Rs 10 million, sub-metropolis up to Rs 500 million, provinces up to Rs 1 billion and federal level up to Rs 5 billion. In addition, the system of ‘auto upgrade/downgrade’ should be implemented that automatically changes the level after the transaction limit is crossed.

Likewise, an integrated digital server would be set up for data exchange among the three tiers of government, an intergovernmental monitoring mechanism would be formed and legal restrictions would be imposed on the operators declared problematic at one level to take responsibility to the other level. The new cooperative registration will be done only from the local level and it will be limited to the regulation at the state and federal level.

It is stated that the jurisdiction and business boundaries should be clarified by amending the Cooperative Act and Regulations under the legal amendment. The ‘one person, one cooperative’ policy will be strictly implemented and a provision will be introduced to set the limit of personal savings. It has been proposed that the federations be completely banned from carrying out savings and loan transactions and limited to only promotional roles.

A compulsory and incentivizing merger policy will be implemented to merge sick cooperatives with strong institutions and laws related to AML/CFT will be strictly implemented to prevent cooperatives from becoming an instrument of illegal money laundering. Strict standards will also be set for the qualifications, experience and conduct of directors and office-bearers.

The information system will be interconnected between cooperatives, banks and government bodies towards technology and financial governance. The COPOMIS system will be mandatory, integrated digital data will be created and the transactions of organizations providing false information will be stopped. The guidelines recommend that cooperatives should be encouraged to invest in productive sectors by prohibiting them from investing in unproductive sectors such as real estate or share market.

Mandatory compliance with international financial standards, publication of quarterly financial white paper and cancellation of registration of institutions not audited for three consecutive years have also been proposed.

Although the government’s roadmap seeks to address the current crisis in the cooperative sector, its effectiveness will depend on its implementation. The problem was further complicated as the policy announcements were made in the past as well, the implementation was weak. Therefore, the main challenge now is to see how much the proposed stringent provisions are applicable in practice.