The government passes an ordinance to reimburse depositors from troublesome cooperatives

While individuals with larger sums would receive their money fairly from the proceeds of the liquidation of those cooperatives’ fixed assets, the government has started the process of returning the money of small depositors of distressed cooperatives on a priority basis.

On Sunday, President Ram Chandra Paudel announced Ordinance 2024 to change some cooperative rules, including a clause aimed at resolving the persistent deadlock in troublesome cooperatives.

Last Tuesday, a cabinet meeting resolved to introduce the cooperative ordinance and suggested that the president approve it.

Government data indicates that 62,760 depositors say they have been harmed by the failing cooperatives. According to the findings of a parliamentary special committee headed by CPN-UML legislator Surya Thapa, 40 cooperatives stole a total of Rs 87 billion from their depositors.

The government has finally increased efforts to find answers to break the impasse at a time when the nation has been experiencing economic stagnation for a long time, with persistent issues in many cooperatives being one of the main factors. According to the ordinance, deposits up to Rs 500,000 may be returned in priority order. According to the ordinance, “any excess amount will be distributed equally among the remaining depositors from the liquidation of assets and credit amounts recovered from borrowers.”

To address the issue of cooperatives, the ordinance calls for the establishment of a “National Cooperative Regulation Authority.” A senior government official with 15 years of experience working in banks, financial institutions, or cooperatives will serve as the head of the five-member authority.

More than Rs 1.51 billion has reportedly been reimbursed to depositors of distressed cooperatives by the government thus far. It represents less than 2% of the entire sum embezzled.

However, in order to collect the rental of cooperative-owned fixed property and free the frozen assets held in collateral while cooperatives are granting loans, the code includes taking the collateral of defaulting borrowers to auction.

Similarly, the regulation aims to have the Credit Information Center handle problematic loans in cooperatives and put defaulters on a blacklist. “Cooperatives will be required to notify the center of any loans exceeding one million rupees, as well as the information of defaulters.”

In a similar vein, the regulation places restrictions on the amount of money that individuals can deposit in cooperatives. In cooperatives governed by municipal authorities, an individual is not permitted to deposit more than Rs 1 million. For cooperatives governed by the federal government, the cap is Rs 5 billion, while for those under provincial jurisdiction, it is Rs 2.5 million.

“Anyone will have to reveal their origins if they anticipate making deposits in cooperatives that exceed the allowed limits. In a similar vein, the ordinance states that those whose deposits exceed the cap will have two years to reduce them.