Kathmandu, May 1: The government has taken a tougher stance against those accused of misusing cooperative savings and defaulting on loans, opening a legal pathway to seize hidden assets and return money to depositors.
Through an ordinance amending the Cooperative Act, 2074, the state has introduced provisions allowing confiscation of property concealed by cooperative fraudsters. The move is aimed at recovering funds and repaying victims of large-scale savings misuse.
The government had earlier announced a plan to return cooperative savings within 100 days, in line with commitments made in the election manifesto of the Rastriya Swatantra Party. A revolving fund has already been established to support the repayment process.
While initial funding will come from the government, the ordinance clearly states that money will be recovered from those involved in fraud and deposited into the same fund. Officials say this is intended to ensure sustainability of the repayment mechanism.
Until now, the Problems Cooperative Management Committee faced legal and procedural hurdles in auctioning or seizing assets linked to fraud cases. The new ordinance removes those barriers, allowing faster recovery and disposal of concealed property.
An official said the revised law would make it easier to liquidate illegally hidden assets by operators, managers, and employees involved in misappropriation, improving the chances of returning savings to depositors. It also strengthens the role of the National Cooperative Regulatory Authority, which is expected to become more proactive in recovery efforts.
The ordinance expands the definition of “family” to prevent offenders from evading recovery by transferring property through partition, divorce, or other arrangements. Even separated family members and those who have divided property remain within the legal scope for asset seizure if linked to fraud.
It also broadens the definition of “relatives,” covering an extensive list of extended family members, and even includes employees of the cooperative where the accused is a member.
In cases where savings have been diverted into companies, businesses, or other financial ventures by officials, the law authorizes authorities to seize and auction such assets to repay depositors.
The ordinance empowers the regulatory authority to suspend licenses or even halt operations of cooperatives that violate laws, ignore directives, or fail to submit financial reports. Savings and credit cooperatives will now fall under stricter monitoring, inspection, and supervision.
Borrowers will also face tighter rules, with provisions ensuring total repayment does not exceed the principal loan amount. Dividend distribution to cooperative members has been capped at 15 percent.
The government has also restricted cooperative unions from engaging in savings and credit business and has given them a three-year period to wind down such operations.
Cooperative victim protection campaigners have welcomed the ordinance, though they raised concerns over distinctions between small and large depositors. They argue that stronger enforcement is needed against operators and managers responsible for misappropriation.
Authorities say cooperation with Nepal Police and Nepal Rastra Bank will strengthen enforcement, while the regulatory body has been given broader powers to freeze assets, restrict foreign travel of defaulters, and ensure loan recovery.
People’s News Monitoring Service
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