New Restrictions Imposed on Savings and Loan Operations of Cooperative Federations
News Summary
- The Department of Cooperatives has instructed cooperative federations to cease accepting new deposits and providing new loans, thereby halting savings and loan operations.
- The Department has mandated federations currently conducting savings and loan transactions to either form a cooperative bank or merge with an existing bank within three years and to publicly disclose a timetable for this process.
- Federations are required to finalize assets and liabilities, conduct audits, hold general assemblies, and submit strategic work plans to the authority by the end of the current fiscal year’s mid-January, as per Department directives.
September 11, Kathmandu – The Department of Cooperatives has imposed a restriction on cooperative federations, instructing them to immediately halt new transactions. Federations have been directed not to accept new deposits or issue new loans.
The directive is based on the implementation of Sub-Clause 9 of Clause 50 of the Cooperative Act, 2017, which restricts cooperative federations from engaging in new savings and loan transactions.
However, district, provincial, and central cooperative federations currently engaged in savings and lending may, within three years, form a cooperative bank or merge with an existing cooperative bank. This provision follows the Cooperative Act amendment ordinance introduced in April and passed by the House of Representatives in June.
The Department is enforcing these legal provisions through official guidance to the federations.
Additionally, federations must ensure no risk arises from existing savings and outstanding loans by preparing and publicly sharing a clear schedule for the repayment of member institutions’ deposits and loans, aiming for settlement within three years.
The Department has further mandated that by mid-January of the current fiscal year, federations must finalize their assets and liabilities, complete audits, and hold general assemblies without fail.
They are also required to develop a strategic action plan regarding whether to establish a cooperative bank or proceed with a merger, supported by board decisions and general assembly approval, and submit these plans to the Cooperative Registrar’s Office and the National Cooperative Regulatory Authority.
Federations moving towards bank formation or merger must fulfill all standards outlined in the Cooperative Act, rules, directives, and those set by Nepal Rastra Bank and the Regulatory Authority. They must also prepare initial mutual agreements and detailed reports for submission to the Registrar’s Office and the Regulatory Authority.
Cooperative federations engaged in savings and loans need to coordinate and cooperate with their subordinate federations, with central federations facilitating provincial federations, provincial federations coordinating with district cooperative federations, and issue-specific cooperative federations liaising with the National Cooperative Federation, as per Department instructions.
Since these federations will be regulated by the National Cooperative Regulatory Authority, they have also been directed to timely provide all requested financial statements, reports, and details.
Lastly, all cooperative federations are instructed to uphold cooperative values and principles, support the development, promotion, and marketing of cooperative businesses, provide education and training, foster mutual cooperation between cooperatives, monitor their member institutions, and engage in policy advocacy to promote good governance within the cooperative sector.