The Government of Nepal has formally established a Loan Recovery Tribunal for savings and credit cooperatives, seven years after legal provisions were introduced under the Cooperative Act 2017 and Cooperative Regulations 2018. This tribunal, endowed with authority equivalent to a district court, is tasked with resolving cases involving bad loans of cooperatives.
A Cabinet meeting on Friday appointed Kriti Bahadur Basnet as the chairperson of the tribunal, with Basanta Parajuli and Govinda Sharma Gaire serving as members. The move follows prolonged demands from cooperative stakeholders who had repeatedly called on the government to implement the legal mechanism stipulated in existing laws to address non-performing loans within the cooperative sector.
Despite the legal mandate, successive governments had delayed action. However, the rising number of troubled cooperatives, many unable to recover loans or return deposits to members, intensified pressure on authorities to act. The government had pledged the tribunal's formation in its upcoming budget as well as policies and programmes.
Under the regulations, cooperatives may file a claim with the tribunal if they fail to recover loans within one year of default. Legal complaints must be lodged within four years of the missed deadline. Once a case is filed, the tribunal is required to issue a verdict within 90 days. It also holds the authority to freeze or auction a debtor’s assets to recover dues. Appeals against its decisions can be filed with the High Court.
Om Devi Malla, President of the National Cooperative Federation (NCF), welcomed the move, noting that poor loan recovery has placed many cooperatives under financial strain. “One of the main reasons many cooperatives are in trouble is their inability to recover loans,” she said, adding, “We’ve long demanded the formation of this tribunal, and the government has finally responded.”
The tribunal model mirrors the debt recovery mechanism already in place for banks and financial institutions under the 2001 Debt Recovery Act. That framework, developed with support from the World Bank and Asian Development Bank under Nepal’s Financial Sector Reform Program, led to the establishment of the Credit Information Bureau and banking-sector-specific recovery tribunals.
