Credit Information Bureau (CIB) of

Nepal
Kiran Thapa
 Contd.
Central Investigation Bureau (CIB):
 The Central Investigation
Bureau (CIB) is the national
investigation agency of Nepal which
is run under Nepal Policy.
 It is sometimes referred as Central
Investigation Bureau of Nepal
Police.
 Credit Information Beurau
• CIB was established in 14 May, 1989 with
the sole objective of improving the
functionality of the country’s financial
system.
• The sole objective of limiting the growth of
the Non Performing Assets of the Banking
and Financial sector of the country by
making efficient financial system.
 Contd.
 Requirement of an adequate and reliable
information system on the borrowers through
an efficient data base was felt by the NRB,
Nepal Government, Credit Institutions and
other players in the banking and financial
sector of the country.
 CIB was incorporated under Nepal Bankers
Association in 1989 as a non-profit
organization to provide vital credit
information service to its member
institutions, in order to allow them to make
informed and objective credit decisions.
 Contd.
 It was reorganized as a public company in
order to strengthen its autonomy and
increase its operational efficiency.
 It was renamed as Karja Suchana Kendra
Limited (KSKL) and got registered as the
Company in September, 2004 under the
Company Act 1997 and started its
operation as an independent and
autonomous entity from March 2005.
 Ownership Structure
Commercial banks = 65%
Development banks = 10%
Finance companies = 15%
Nepal Rastra Bank = 10%
 Members
 All BFI that are registered in Nepal Rastra Bank
and engaged in credit lending of any amount
must be registered in CIB as its member.
 Only the registered members can avail the
credit reports and other credit information
service provided by CIB.
 There are altogether 137 banks and financial
institutions that are registered as members of
CIB.
 Commercial banks – 27, Development bank
nationals - 8, Development bank regional – 10;
 Contd.
 Finance companies – 20
 Microfinance institutions – 70
 Infrastructure bank ltd. - 1
 Cooperatives - 4
Functions of CIB of Nepal
Collect the credit information of the
borrowers from BFI
Provide the credit information
report to BFI
Provide the name of list of serious
defaulters
Submit credit report to the central
banks
 Products & Services

• CIB issues both consumer and commercial credit reports

 Every month CIB collect the thousands of updated
borrowers profiles (consumer and corporate both)
uploaded in database.
 Data relating to the subject secured or unsecured loan
performance is collated on their credit file to complement
the assessment process of the credit grantors.
 CIB offers immediate online access of the consumer and
corporate credit reports to its members.
 CIB’s report contains information pertaining to credit
worthiness of the member’s clients which enables members
to access the credit risk more objectively, minimize the risk
of bad debts and increase market penetration and volume
of credit extended.
 Contd.
(1) Consumer (individual) credit report
• borrower's name
• address
• individual identifications details (citizenship number,
passport number, driving license etc),
• family details,
• concern details,
• details of credits (type of credit facilities, sanctioned amount,
disbursed amount and date, loan number, account
ownership, last payment dates, payment delay days,
outstanding and overdue amounts, security types &
settlements dates),
• previous enquiries
• blacklist information.
 Contd.
(2) Commercial (corporate) credit reports
• name of the firm/company,
•registered address,
•registration number, PAN number,
•details of the shareholders and their concern details.
•details about the types of credit facilities, sanctioned

amount, disbursement amount and date, loan type,

account ownership, last payment amount & date,
payment delay days, outstanding and overdue amount,
settlement date, account reporting date,
•previous enquiries
•blacklist information.
 Who are blacklisted as borrowers?
•There are many criterions in NRB directives under which a
borrower could be blacklisted.
•But the major criterions are as follows: when the borrowers,
who have the outstanding loans equal to or in excess of 2.5
million and whose principle and interest are overdue by a year
•Bankruptcy or Disappearance of Borrower
•Misuse of Credit Facilities by the Borrower
•Inadequate or inappropriate security 
•Other circumstances such as: Auction notice by the Bank or FIs
for loan recovery
•Borrower proven guilty by the court for forgery & criminal
cases.
•Borrower fails to repay debt even after the court notice issued
in favor of Bank or FI.
•Individuals who issue Bounced Cheque
Who blacklist the borrower?
• It is the banks and financial institutions
who recommend the names of the
defaulted borrowers for the blacklist.
• KSKL includes the name of the borrowers
into the blacklist only after the written
recommendation by the banks &
financial institutions.
• KSKL does not have the right to list and
de-list any borrower into and from the
blacklist.
 Criteria of removing from Blacklist
• Apart from other criterions, the major
criterions for removing from blacklist are:
- On the settlement of loan account
- Credit facilities rescheduled or restructured
under the prudential norms of Central
Bank.
- Liabilities of the loan accepted by other
person which is acceptable to the Board of
Directors of the concerned Bank and FI
 Credit rating
 A credit rating is an evaluation of
the credit worthiness of a debtor,
especially a business (company)
or a government.
 This evaluation is made by a
credit rating agency.
 These are expressed in
alphabetical or numerical
symbols.
 Credit rating agencies
 A company that assigns
credit ratings, which rate a
debtor’s ability to pay back
debt by making timely
interest payments and the
likelihood of default.
 ICRA’s rating process
 Issuer requests for a rating
 Issuer signs rating agreement and pays
the rating fee
 Issuer provides information
 Analysts process the information and
meet the management/bankers/auditor
 Rating report prepared by analysts
 Rating committee assigns rating
 Communication of rating to the issuer
 Decision of the issuer
 ICRA’s rating scales
 Long term rating scale
 Medium term rating scale
 Short term rating scale
 Long term structured instruments
Issuer rating
Long term debt rating scale
Short term debt scale
Fund management quality rating
IPO /FPO grading scale
 Credit rating
 Practice of credit rating started in Nepal in
2011, after Securities Board of Nepal
(SEBON) introduced Credit Rating
Regulation, 2011.
 Rating Agency of Nepal

• ICRA Nepal Limited (ICRA Nepal), the first

Credit Rating Agency in Nepal, is a
Subsidiary of ICRA Limited (ICRA) of India.
• It was incorporated on November 11, 2011
and granted license by the Securities Board
of Nepal (SEBON) on October 3, 2012.
• ICRA Nepal is supported by ICRA Limited
through a Technical Support Services
Agreement, which envisages ICRA helping
ICRA Nepal in such areas as rating process
& methodologies, analytical software,
research, training, and technical &
analytical skill augmentation.
 Objectives

•Provide information and guidance to

institutional and individual investors/creditors;
• Enhance the ability of borrowers/issuers to
access the money market and the capital
market for tapping a larger volume of
resources from a wider range of the investing
public;
• Assist the regulators in promoting
transparency in the financial markets; and
• Provide intermediaries with a tool to improve
efficiency in the funds raising process.
 Services
• Ratings
ICRA Nepal rates rupee denominated debt
instruments issued by commercial banks,
financial institutions, non-banking finance
companies, public sector undertakings, and
manufacturing and service companies,
among others.
 Contd.
• Gradings
The Grading Services offered by ICRA Nepal
employ pioneering concepts and
methodologies, and include Grading of
Initial Public Offers (IPOs).
 Contd.
• Methodology for Ratings:
ICRA Nepal considers all relevant factors that
have a bearing on the future cash generation
of the issuer. These factors include: industry
characteristics, competitive position of the
issuer, operating efficiency, management
quality, commitment to new projects and
other associate companies, and funding
policies of the issuer.
A detailed analysis of the past financial
statements is made to assess performance
under "real world" business dynamics.
 Rating services
• Corporate debt rating
• Issuer rating
• Bank loan /line of credit rating
• Insurance sector rating
• Fund management quality rating
 CARE Ratings Nepal Limited (CRNL)
• CARE Ratings Nepal Limited (CRNL) is
incorporated in Kathmandu, Nepal and is the
second credit rating agency to be licensed by
the Securities Board of Nepal w.e.f. November
16, 2017.
• CRNL will provide credit ratings and related
services in the geography of Nepal.
• The rating services of CRNL will include rating
of debt instruments, IPO Grading, Issuer
Rating, Bank loans & facilities and related
obligations covering a wide range of sectors.
 Contd.
Rating
AAA
AA
A
BBB
BB
B
C
D
 Deposit and credit guarantee fund (DCGF)

• Financial stability is one of the topical issues

that has been accorded increased attention from
central bank, government, market players,
borrowers and deposit insurer.
• As a deposit insurer, Deposit and Credit
Guarantee Fund (DCGF) has started the deposit
guarantee scheme in Nepal from the year 2010.
• Deposit guarantee/insurance is recognized
globally as an important component of a
country’s financial safety net and has been
implemented in 120 countries around the world.
 Contd.
• It is a system that protects depositors against the loss
of their guaranteed deposits placed with banks and
financial institutions (BFIs) in the case of unlikely event
of the BFIs failure.
• DCGF has given the statutory responsibility to perform
both the deposit guarantee and credit guarantee
function through Company Act.
• In the DCGF Board there has been representation of
four from the government and one from Nepal Rastra
Bank.
• DCGF is a government sponsored and administered
separate entity.
• Generally, deposit guarantee system is a government
sponsored scheme.
 Contd.
• In Nepal, deposit guarantee scheme is confined
to BFIs namely (i) commercial banks, (ii)
development banks, (iii) finance companies and
(iv) micro credit development banks.
• DCGF has fixed the premium rate of 0.16 % on
guaranteed deposit to all BFIs member
institutions.
• The coverage of deposit guarantee is limited to
Rs 3,00,000 per natural individual depositors
per member institution applicable on a
combination of saving and fixed deposit.
 Functions
• Provide deposit guarantees
• Provide credit guarantees
• Provide stability in the financial system.
• Increase competitiveness in the financial
system.
• It helps in poverty alleviation
• To support in the overall economic
development of Nation.
 Merchant bankers
- If a firm sells new securities to raise cash, the
offering is called a primary issue.
 The agent responsible for finding buyers for

these securities is called the investment

banker.
 Investment banker is also known as issue

manager.
- Investment bankers are neither investors nor
bankers.
 They purchase primary issues from security

issuers and, then, arrange to immediately resell

these securities to the public.
 Contd.
 The investment banker acts as the
middleman in channeling individuals'
savings and funds into the purchase of
business securities.
 NMB Capital Limited, Citizen Investment
Trust (CIT), Prabhu Capital Limited, Global
IME Capital Limited, NABIL Investment
Banking Limited, Civil Capital Limited and
Siddhartha Capital Limited are the popular
investment bankers in Nepal.
Contd.
 Functions of merchant manager
 Issue Management
 Underwriting
 Mutual Fund
 Portfolio Management Services (PMS)
 Depositary Participant (DP)
 Registrar to the Shares (RTS)
 Corporate advisory services
Venture capital and private equity funds
 Venture capital and private equity funds

 An equity or equity features capital seeking

investment in new companies, new products,
new process or new services, that offer the
potential of high return on investment.
 Private equity is capital that is not noted on
public exchange.
 Private equity is composed of funds and
investors that directly invest in private
companies, or that engage in buyouts of
public companies, resulting in the delisting
of public equity.
 Features of venture capital
• High Risk.
• Lack of Liquidity.
• Long term horizon.
• Equity participation and capital gains.
• Venture capital investments are made in
innovative projects.
• Suppliers of venture capital participate in the
management of the company.
 Contd.
 Institutional and retail investors provide
the capital for private equity.
 PE firms buy mature companies
 Venture capital invest mostly in early
stage companies.
 PE firms buy companies across all
industries.
 VC’s are focused on technology, bio tech
and clean tech companies
 Contd.
 PE firms almost always buy 100% of a
company.
 VC only acquire a minority stake which is
less than 50%.
 Size of investment is high in private equity
 Size of investment is low in venture capital
 PE: Uses combination of equity plus debt
 VC: uses only equity
 Time horizon: 6 to 10 in private equity
and 4 to 7 in VC
 Contd.
 ROI = PE: Depends on the inherent risk of
particular firm and industry
 VC: Many failures, some solid returns, a
few spectacular successes.
 Pension funds
 Pension fund set up by a corporation, labor
union, government entity, or other
organization to pay the pension benefits of
retired workers.
 Pension funds invest annually in the stock
and bond markets, and are therefore a
major factor in the supply demand balance
of the markets.
 Contd.
 Earnings on the investment portfolios of
pension funds are tax deferred.
 Fund managers make actuarial assumptions
about how much they will be required to
pay out to pensioners and then try to
ensure that the rate of return on their
portfolios equals or exceeds that
anticipated payout need.
 A pension fund, also known as a
superannuation fund in some countries
 Contd.
 A pension plan is an asset pool that
accumulates over an individual’s working
years and is paid out during the
nonworking years.
 Also became popular as life expectancy
increased .
 Pension fund industry comprises two
sectors:
 (1) Private pension funds
 (2) Public pension funds
 Contd.
 (1) Private pension funds
 Are those funds administered by a private
corporation (e.g. insurance company,
mutual fund etc.)
 (2) Public pension funds
 Are those funds administered by a federal,
state or local government .
 Types of pension plan
 Pensions funds can also be distinguished by
the way contributions are made and benefits
are paid.
(1) Defined benefit pension plan
- A plan where the employer promises the
employee a specific benefit when they
retire.
- Defined benefit pensions promise the
members of such a plan fixed payments from
their pension fund on scheduled future dates
(such as monthly, quarterly, or annually).
 Contd.
- Under a defined benefit plan, the employer
agrees to give retirees a specifically defined
benefit, such a Rs 1,000 per month, 20
percent of his/her last salary, or 2.5
percent of his/her highest annual salary for
each year of employment.
- The payments could be fixed as of the
retirement date or they could be indexed to
increase as the cost of living increases. The
key of this plan is the payments to retirees
are specified (defined).
 Defined contribution pension plan
 Pension fund in which the employer agrees
to make a specified contribution to the
pension fund during the employee’s
working years.
 The final retirement benefits is based on
(1) Employer contribution
(2) Any additional employee contribution
(3) Gain or losses on the investments
purchased by the fund with these
contributions.
 Contd.
• In this pensions promise no fixed benefits.
• Pension plan members receive retirement benefits
based on the earnings performance of the assets
in which the pension plan’s managers have
invested incoming employer and employee
contributions.
• Defined contribution plans shift the risk of
achieving adequate retirement income to the
pension plan member, whereas defined benefit
plans place much of that risk on the pension plan
itself or, more accurately, on the sponsoring
employer to come up with sufficient funds in the
future to cover promised benefits.
 Hybrid pension funds
• A hybrid pension scheme is one which is neither a
full defined benefit scheme nor a full defined
contribution scheme, but has some of the features
of each.
• In a defined contribution scheme, the member
generally bears the full risk (of paying higher costs
or receiving reduced benefits) if investment return
or pension costs are not as good as expected.
• In a defined benefit scheme, the employer usually
takes that risk and pays higher contributions in
order to maintain the agreed level of benefits.
•In hybrid schemes, the risk can be shared between
the employer and employees.
 Pension funds in Nepal
•First Pension scheme was established for the army
personnel on 17th bhadra 1998 BS. (Pension amount
was 1/5 of salary; paid till death) Pension for civil
servants was established. In 14th Mangsir 1999.
• Pension amount was 1/6 of salary. With a minimum of
25 years service for eligibility.
• Civil servants having at least 20 years service are
eligible to receive pension for life. Amount of pension
for civil servants not be less than 50% of basic salary
and not more than 100% depending upon length of
service, last drawing salary and denominator.
• After democracy in 1950, Pension payments were
formalized and paid monthly.
 Contd.
- Pension payments calculation formula
Pension = (Total service year × Last salary
amount )/ 50
Example:
 Employees’ Provident Fund
• Karmachari Sanachaya Kosh (KSK), also known as
Employees Provident Fund (EPF) in English.
• EPF manage provident fund in Nepal on behalf of the
GoN come under Ministry of Finance.
• Employee’s Provident Fund (EPF) is a retirement
benefit scheme that’s available to all salaried
employees.
• EPF collect the savings of employee and provide
retirement benefits.
• Membership to KSK is also open to private sector
firms with the only condition that such firms should
have at least ten employees contributing regularly
to become a member.
 History
• 1934 - Sainik Drabya Kosh (Army Provident
Fund) during the Rana Regime.
• The scheme was initiated with the intentions of
removing financial hardships to the army
personnel after their retirement.
• Under the scheme, the army staffs were
required to contribute a specific percentage of
their salary to their provident fund (PF) account
in Sainik Drabya Kosh.
• A decade later the scheme was broadened to
cover the employees of civil services as well.
 Contd.
• 1944 - Nijamati Provident Fund was established in 1944
to manage the scheme for civil servants working within
Kathmandu.
• 1948 the coverage of the scheme was extended to
provide coverage to the entire civil servants working
through out Nepal.
• In 1959, Employees Provident Fund (EPF) Department
was established under the Ministry of Finance and
Economic Affairs.
• This department was entrusted with the management
of both Sainik Drabya Kosh and Nijamati Provident
Fund. With this, the scope of the scheme was extended
to cover all government employees including the
police. 
 Contd.
• Three years after the establishment of EPF
Department, a special Act called "Karmachari
Sanchaya Kosh (KSK) Act" was legislated in the
year 1962. The same year the present KSK was
established under the act as an autonomous
provident fund organization.  
• After the establishment of KSK, Sainik Drabya
Kosh, Nijamati Provident Fund and Provident
Fund Department were merged into KSK. Since
then KSK has grown by leaps and bounds and
today it stands as a strong social security
providing organization in Nepal. 
 Objectives
•To mobilize the savings received through the
compulsory provident fund contributions on the part
of employees and employer.
•To extend the coverage so that a larger section of
the organized sector employees, who have yet not
been covered, can be brought under the KSK
umbrella with a view to benefit them.
•To generate maximum return on the investment for
the benefits of the members.
•To undertake activities that can provide social
security to the members.
•To conduct research activities and to explore welfare
schemes which can benefit the members at large.
 Contd.
The Board of Directors consists of seven members:
• A Chairman appointed by Nepal Government.
• Three Directors nominated by Nepal Government
from different government services. 
• Two Directors nominated by Nepal Government
from banking, financial and corporate sectors.
• Administrator of KSK (CEO).
• An Officer of KSK appointed by the board act as a
Secretary of the board
 Contd.
•All Board Directors except the Administrator is
 nominated by Nepal Government  for a period
of three years in a single term.
• They may be re-appointed for one more term.
• The primary responsibility of the Board is to
formulate plans, programs, and policies; and
to approve the annual budget, which are
executed through the Administrator.
• The Administrator assumes overall
responsibility of managing day-to-day
activities of the EPF.
 Functions of EPF
• Collect the funds from and invest in the
various sectors.
• Social security benefits:
- Accident Indemnity
- Funeral Grant
- Employees Welfare Scheme (Insurance)
- Medical assistance
 PF contribution rate
•The rate of PF contribution for all
employees is ten percent of their salary,
which is to be supplemented by an equal
amount by the employer.
• The total PF contribution amount is to be
sent to KSK on a monthly basis when
salaries are prepared.
 Contd.
• The following table depicts the various
rates of contribution at different times.
Employee      Employer
1962/1963 Rs. 2 to 475 based on salary 10% of employees' contribution
1967/1968 10 percent of employees' salary 50% of employees contribution for non
officers 25 % of employee's
contribution for officers.
1971/1972 10%  of salary Matching contribution
1991/2017 At least 10% of salary Matching contribution
 Role and importance
• Mobilize saving
• Promote long-term investment
• Economic growth
• Development of capital market
• Revenue generation
• Industrialization
• Employment opportunity
 Citizen Investment Trust (CIT)
 Established under Citizen Investment
Trust Act 2047
 Established in 2047 Chaitra 4
 Operated from 2048, magh 1
 Motive to collects the savings from public
 Increase capital and investment
opportunities
 Functions
(1)Saving Mobilization
a. Operate different kinds of retirement schemes:
• Gratuity funds.
• Nepal Government Employee’s Insurance
funds.
• Teacher’s Insurance funds.
• Employees Saving Growth Retirement funds.
• Pension Funds
b. Operation various unit and mutual fund
schemes to both domestic and foreign investors
 Contd.
2. Investment /financing
•Invest in corporate shares, debentures and
government securities.
•Provide term loan and bridge finances to
corporate bodies.
•Provide credit for purchasing shares.
 Contd.
C. Capital Market services
 Issue management

 Underwriting

 Registrar to share (RTS)

D. Pension funds
 Name: Citizen pension plan
 Minimum contribution Rs 500
 Monthly or quarterly or semiannually or
annually
 Can be contributed more than Rs 500 but
amount must be divisible by 10.
 Contd.
 Eligible for pension after 60 years
 Total contribution period is 15 years.
 Pension is calculated as total sum at the end of
period divided by 170.
 Pension = Total sum/170
 Total sum = deposited amount, interest and
profit from investment
 Pension provided in monthly basis for whole life
 If retiree dies, then his/her husband/wife will
received the same pension.
 If husband/wife dies before pension then
nominee will get pension.
 Contd.
 The deposited amount will not returned
before 2 years.
 After 2 years, the deposited amount will
be returned if he/she wants to withdraw
with specific reason.
 If the contributor deposited for 5 years,
then 80% loan can be provided.
 Social security funds (SSF)
 Social security is a programme of social
protection established by legislation, or
any other mandatory arrangement, that
provides individuals with a degree of
income security when faced with the
contingencies of old age, survivorship,
incapacity, disability, unemployment or
rearing children. 
 This programme may also offer access to
curative or preventive medical care.
 Contd.
 Social Security Fund (SSF) is a new concept
applied in Nepal.
 With the enactment of Social Security Act and
Rules, the Government has implemented and
enforced the social security fund.
 It is compulsory for all the employers of
formal sector, including the companies, firm,
NGOs, INGOs, agencies to register at social
security fund and also deposit the required
contribution of its employees.
 Contd.
 Social security fund is mandatory for all the
employers and employees of such employers of
formal sectors (covered by definition of labor
act 2074).
 It is voluntary for self-employed employees and
employees working in informal sector.
 Contd.
 The employer shall have to deduct 11 per cent
of the basic salary of the employee and
contribute another 20 per cent of the employees’
basic salary to deposit to the fund. (Social
Security Scheme Operation Procedure, 2075)
 Contd.
- Use of contribution includes accidental
disability protection scheme (1.40%)
- dependent protection scheme (0.27%)
- medical and safe maternity scheme (1.00%)
- pension scheme (28.33%)
 Contd.
 (1) Accidental and disability protection scheme
(1) Accidental protection
 All expenses incurred for treatment of injury or
disease.
 In case treatment of same is done without informing
to social security fund in other than listed hospitals,
maximum of Rs 700,000 will only be borne by the
fund.
 Contd.
(2) Disability Protection
 Temporary physical disability: 60% of basic
salary is paid on monthly basis until he/she is
able to return to work
 Permanent physical disability due to
employment related accident: 100% of basic
salary is paid monthly proportionate to
disability ratio until his/her death
 Contd.
(2) Dependent protection scheme
 Pension amount for spouse
 Eligible on death of contributor (due to any
reason).
 Shall be provided to spouse 60% of basic
salary of the contributor at the time of his
death.
 Contd.
 Educational benefit to the children
 Children below 18 years of age shall be given
40% of basic salary in case of death of
contributor (If more than one eligible child 40%
of basic salary shall be paid proportionately to
upto two children)
 Contd.
 Funeral Expense Benefit
 On death of the contributor due to any reason,
the dependent family or the beneficiary shall
be provided Rs. 25,000
 Contd.
(3) Medical and safe maternity scheme
 Such facilities shall be provided to those
contributors contributing for 3 months.
This will remain effective for 3 months
after contributor stops making
contribution.
 Contd.
(4) Pension scheme
 This scheme is operated with 10% PF and 8.33% gratuity
contributed by the employer and 10% PF contribution
from the employee.
 To be eligible for old age protection scheme, the
contributor shall be paid the gratuity amount receivable
before Bhadra 19, 2074 as per Labour Act, 2074, and
shall deposit the gratuity amount in to the fund from
such date.
 Contd.
 The contributor shall be above the permanent
retirement age (60 years) and should have made
contribution for at least 15 years to be eligible to
receive pension
 Computation of monthly Pension amount:
 Pension = (Total contribution of employee and
employer + profit from the investment) / 160.
 Contd.
 In case the contributor attains the age of 60 before
making contribution for 15 years, contributor may
opt to obtain pension amount as per computation
above or take lumpsum amount of contributions and
profit from the investment of SSF.
 In case of death of contributor before the age of
compulsory retirement (60 years), total contribution
plus the interest/profit should be paid in lump sum
to the legal heir.
 Contd.
 In case of death of contributor after starting to get pension
but before getting pension for 15 years, spouse of
contributor will be allowed pension, for lifetime,
equivalent to 50% of the pension amount to which
contributor was eligible.
 As per section 63 (2) of Income Tax Act 2002 read with rule
21 (2) of Income Tax Rule 2002, in case of contribution to
Social Security Fund, actual contribution to the extent of
NPR 500,000 is allowed as deduction for income tax
purpose.
 Cooperatives
 Cooperative can be defined as an
association of persons who have
voluntarily joined together to achieve a
common objectives.
 Cooperatives are autonomous associations
formed and democratically directed by
people who come together to meet
common economic, social, and cultural
needs.
 Contd.
- Founded on the principle of participatory
governance, cooperatives are governed by
those who use their services: their members.
- Cooperatives societies are distinct from
business because the main motive behind
performing such activities is for the mutual
benefit of the members and the society as a
whole.
- People having low economic status combine
their capital to operate in a large scale
through mutual cooperation for boosting up
their socio-economic condition.
 Features
 Voluntary organization
 Democratic management
 Open membership
 Cash transaction
 Service motive
 Mutual help and cooperation
 Separate legal existence
 Distribution of profit
 Types
 producers’ cooperative
 Consumer’s cooperative
 Saving and credit cooperatives
 Insurance cooperatives
 Housing cooperatives
 Farming cooperatives
 Marketing cooperatives
 Transport cooperatives
 Importance
1. Encourage Saving
2. Institutional Credit
3. Reasonable Price
4. Industrialization
5. Growth of Income
6. Democratic Role
7. Equity
8. Spirit of Cooperation
9. Empowerment of Poor People
10. Employment Opportunities
11. Agricultural Development
 Types of cooperatives in Nepal
• The major types of co-operative societies operating in Nepal are
-Saving and Credit,
-Multipurpose,
-Dairy,
-Agriculture,
-Fruits and Vegetables,
-Bee Keeping,
-Tea,
-Coffee,
-Consumers,
-Science and Technology, and Energy.
- It is believed that some 6 million people are already affiliated in
35,000 cooperatives and more than 60,517 people are employed
directly in Cooperative business.(2017, Department of
Cooperatives)
 Organization of cooperatives
 General meeting
(1) Preliminary general meeting
- BOD calls preliminary general meeting
within 3 months of establishment
(2) Annual general meeting
- BOD calls AGM within 6 months from the
completion of each fiscal year.
- Elect new BOD in every 4 years
(3) Extraordinary general meeting
- Held on special circumstances and urgent
decisions have to be made.
 Contd.
 Board of directors
- General meeting elects the BOD
- Number and composition of BOD depend
on provision of bylaws of the concerned
cooperatives.
- Term of each director is 4 years
- Elect director one man one vote.
 Account supervision committee
- Provision of account supervision
committee
- One convener and two members
 Regulation
 Regulator : Department of Cooperatives
 Regulation
 (1) Cooperative Act 2017
 Contd.

The end
All the best for the end term
exam 2022