The government has prioritized the return of funds to small depositors from problematic cooperatives, while ensuring that larger depositors receive their money equitably through the liquidation of cooperative assets.
On Sunday, President Ram Chandra Paudel issued the Ordinance 2024, amending cooperative-related laws to address the ongoing crisis. This followed a Cabinet decision earlier in the week to recommend the ordinance for final approval.
The ordinance stipulates that deposits of up to Rs 500,000 will be refunded on a priority basis. For deposits exceeding this amount, payments will be made proportionally from the liquidation of fixed assets and the recovery of outstanding credits. It also establishes a ‘National Cooperative Regulation Authority,’ a five-member body led by a senior official with at least 15 years of experience in banking or cooperatives, to oversee and address issues in the cooperative sector.
To recover funds, the ordinance mandates auctioning collateral from defaulting borrowers, recovering rent from fixed properties owned by cooperatives, and releasing frozen assets held as loan guarantees. Additionally, it empowers the Credit Information Center to oversee bad loans in cooperatives, requiring cooperatives to report loans exceeding Rs 1 million and provide defaulter details for blacklisting.
The ordinance places limits on individual deposits in cooperatives. For cooperatives under local bodies, the cap is Rs 1 million; for those under provincial jurisdiction, it is Rs 2.5 million; and for federal cooperatives, the limit is Rs 5 billion. Individuals wishing to deposit more than these prescribed limits must disclose their sources of funds. Existing deposits above these limits must comply within two years.
Currently, government statistics indicate that 62,760 depositors have been affected by 40 cooperatives, which have collectively misappropriated Rs 87 billion. So far, only Rs 1.51 billion—less than 2% of the total misappropriated funds—has been refunded.
The ordinance marks a significant step in addressing the financial turmoil caused by problematic cooperatives, a major factor in the country’s prolonged economic stagnation. By focusing on fund recovery, regulation, and oversight, the government aims to restore stability and trust in the cooperative sector.
