The government has opened the way for the return of the money of the savers of problematic cooperative organizations. Through the ordinance made to amend the Cooperative Act 2074, the government has made arrangements to provide funds and to recover the money by selling the assets of the organization. 

‘The expenses incurred in the process of managing the assets will be borne from the assets of such an organization,’ the ordinance states, ‘If the amount required for the return of savings cannot be recovered from the assets of the organization, the Government of Nepal may provide the necessary amount for that purpose by recovering it from the assets of such an organization.’ 

The working procedures issued by the government earlier stated that a revolving fund would be established to return the money of the savers of cooperatives. For this, the government has issued the ‘Working Procedures 2083 on the Establishment and Operation of the Revolving Fund for the Return of Savings of Members of Problematic Cooperative Organizations’. However, the government has made this arrangement through the ordinance at a time when there are voices that the money paid by taxes should not be used to return the money of the savers.

The ordinance has revised and expanded the definition of family and relatives in the Cooperative Act. Family means husband, wife, son, daughter-in-law, daughter-in-law, adopted son, adopted son-in-law, adopted daughter-in-law, father, mother, stepmother and brothers, sisters, brothers, brothers-in-law, sisters, and brothers who have to be supported by the person. Similarly, in the case of a male member, his grandfather, grandmother, mother-in-law, father-in-law, and in the case of a female member, his mother-in-law, father-in-law, father-in-law, father-in-law, father-in-law, father-in-law, mother The ordinance also provides for the establishment of a revolving fund envisaged by the government in the procedure for the return of savings. ‘The Government of Nepal may establish a revolving relief fund in the management committee for the purpose of immediately returning savings to members of troubled cooperative organizations,’ the ordinance states, ‘The fund will consist of the amount received from the Government of Nepal, the amount returned for reimbursement from the concerned organization, and the amount received from other sources.’ The ordinance provides for the fund to be deposited in a separate account in a commercial bank and for its separate records to be kept. The ordinance provides for the problematic cooperative management committee to gradually reimburse the amount received from the government to the fund from the movable and immovable properties of the debtors under the jurisdiction of the troubled organization and the amount recovered from other sources. Similarly, the amount in the fund account will not be frozen at the end of the fiscal year, and separate records of income and expenditure of the amount received from the government in the fund should be kept and spent only for the purpose of returning savings. The ordinance provides that the troubled cooperative management committee should gradually replenish the funds received from the government from the movable and immovable properties of the debtors under the jurisdiction of the troubled organization and from other sources.

‘A member of a cooperative organization that has been inactive for two consecutive years without doing business, has acted contrary to this Act and the regulations made under this Act, has gone into liquidation or dissolution, and has been declared problematic as per Section 104 of the Act is considered a family member who has been separated or divorced,’ the ordinance states. Earlier, the definition of family did not include in-laws, father-in-law and other members of the family.

‘Relatives include uncles, aunts, nephews, nieces, grandsons, granddaughters, granddaughter-in-law, maternal uncles, maternal uncles, maternal aunt

‘A cooperative organization should be considered one in which the ratio of the total savings amount collected by the organization or the total loan amount flowed out to the total assets or total liabilities mentioned in the balance sheet of the cooperative organization is more than 50 percent,’ the ordinance states. ‘That term also refers to a cooperative organization with a total savings amount or total loan investment of more than 250 million rupees in the balance sheet of a cooperative organization.’ Even in the case of cooperatives with savings or total loans of less than 250 million rupees, it has been said that the organization with a ratio of the total savings amount or total loan amount of more than 50 percent should be placed in the savings and loan category.

Now, all types of cooperatives with a total savings or total loan investment of more than 250 million rupees will also fall into the savings and loan category.

Similarly, the tenure of office bearers including the chairman of a cooperative organization has also been tightened. The current Cooperative Act provides that no person can be elected to the post of chairman, vice-chairman, secretary, treasurer, or coordinator of the accounts committee of a cooperative organization at any one level for more than two terms. The ordinance has removed the phrase ‘one level’ in the provision. Now the aforementioned officials will not be allowed to hold the post for more than two terms.

Similarly, the scope of regulation and supervision of cooperative societies has also been clarified in the ordinance. ‘In the case of cooperatives that mainly deal in savings and loans, the Authority and in the case of other cooperatives, the Department will coordinate with the Credit Information Center,’ the ordinance states, ‘However, in the case of cooperatives that have provincial or local jurisdiction, it will be in accordance with the relevant provincial or local cooperative law.’ Notwithstanding anything written elsewhere, the ordinance provides that the Authority can audit the accounts of cooperatives that mainly deal in savings and loans.  Similarly, the ordinance provides that the total interest charged by a cooperative society cannot exceed the principal amount. The ordinance provides that cooperative societies cannot engage in savings and loan transactions. However, the ordinance provides that cooperative societies that were engaged in savings and loan transactions at the time of the commencement of this subsection must cease such transactions within three years from the date of commencement of this subsection. ‘After the report is entered according to the details of cooperative societies, the registrar of the department shall update the society every year by mentioning the share members and share amount.’ Although there are complaints that the Cooperative Department currently does not have the details, an attempt has been made to strengthen the registrar through the ordinance. 

In the special provision related to monitoring, inspection and supervision of cooperatives that mainly deal in savings and loans, associations have been removed. Since associations are not allowed to deal in savings and loans, they have also been removed from the scope of regulation. 

‘Cooperatives that mainly deal in savings and loans will have to adopt the monitoring system as prescribed by the Authority. The Authority shall monitor, inspect and supervise the institutions engaged in the main business of savings and loans based on the prescribed monitoring system,' the ordinance states, 'While monitoring, inspecting and supervising in accordance with the Act, it may seek the assistance of other bodies including Nepal Rastra Bank as required in implementing the savings and loan operation standards.'

In the special provision related to monitoring, inspection and supervision of cooperative institutions engaged in the main business of savings and loans, associations have been removed.

Similarly, Section 103 J of the Cooperative Act has been amended to add a provision to facilitate or cause to be facilitated the recovery of the institution's debt. In which, a provision has been added to order the return of the savings of the savers within a specified period, and to take action by having them appear before the Authority with the assistance of agencies including Nepal Police as required.

Similarly, these provisions have been added to the ordinance after subsection (1a) of section 104 of the original act. According to which, before recommending a problematic declaration, the registrar or the Authority must take control of or block the movable and immovable properties, transactions, bank accounts, shares, and loan certificates, electronic records of the concerned cooperative organization, including the directors, debtor members, managers, responsible employees, members of the Accounts Supervision Committee, loan subcommittees, and other responsible persons involved in the embezzlement and loss, and ban them from traveling abroad. In addition, the ordinance provides for freezing the movable and immovable properties in the names of directors, employees and other concerned persons of cooperative institutions engaged in the main business of savings and loans who do not return the savings or do not cooperate in that work as per the order given by the Authority, and imposing a ban on foreign travel. Even after following this process, if the saver's savings are not returned, the Authority has added a provision to register the director, employee, other person concerned or their family members of the cooperative organization that mainly deals with savings and loans as an offense and send them to the concerned police office to take action in accordance with the prevailing law.

‘The provisions regarding the declaration of problematic cooperative organizations within the regulatory jurisdiction of the provincial and local levels and taking action will be in accordance with the laws of the relevant provincial and local levels,’ this provision seeks to further strengthen the local government and provincial government in cooperative regulation.  

The cooperative organizations that mainly deal in savings and loans will have to submit a report within the time specified by the Authority regarding compliance with the directives issued by the bodies under the prevailing law, and the Authority may study the report and give necessary instructions.