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Co-Operative Societies Act 2008


28. Bad and doubtful Loan allowance

1.     A credit union shall establish and maintain on its books and accounts a minimum allowance for loan losses in the amount of three (3) percent of its total loan portfolio.

2.     When a credit union identifies a loan as a doubtful or, uncollectible loan, the credit union shall immediately allow for the doubtful loan by—

a.     establishing on its books and accounts an allowance for the doubtful loan in an amount equal to the difference between—

                      i.        the book value of the loan, including any interest due and unpaid and interest accrued; and

                     ii.        the realizable book value of the loan as estimated by the credit union;

b.    reporting on any income statement it prepares, including its annual income statement required pursuant to Regulation 10, as a loss from income an amount as an allowance for doubtful loans equal to the sum of allowances for all doubtful loans established in accordance with paragraph (a); and

c.     reporting on any balance sheet it prepares, including its annual balance sheet—

                      i.        the value, as an asset, of its doubtful loans in an amount equal to the value of all the doubtful loans as stated on its books and accounts less the allowance for the doubtful loan established in accordance with sub paragraph (a); and

                     ii.        any property or other assets acquired in the financial year pursuant to a foreclosure realisation proceedings on a loan that was a doubtful loan at an amount not greater than the realizable value of the loan—

A.    as estimated by the credit union pursuant to paragraph (a)(ii); and

B.    as stated on the books and accounts of the credit union before the property or assets were realized pursuant to the foreclosure or other proceedings.

3.     Notwithstanding paragraph (2), a society registered under the former society Act in respect of the financial year prior to the society’s continuance may, instead of charging its allowance for doubtful loans to its income in the manner required by paragraph (2)(b), charge the amount of the allowance as calculated pursuant to paragraph (2)(a) to the reserve required by the Act.

4.     A credit union shall report, at the end of each financial year to the Registrar—

a.     the number and amount of doubtful loans for which an allowance has been made in accordance with this Regulation in that financial year;

b.    the amount of allowance for doubtful loans made pursuant to paragraph (2) or (3) in that financial year; and

c.     the value of property and other assets recovered in that financial year on doubtful loans.

5.     The Board of directors of a credit union shall cause a list of all doubtful loans to be available at the registered office of the credit union for any examination required by the Credit Committee, Supervisory Committee or the auditor of the credit union, and the Board shall send a copy of that list to the Registrar.

6.     The list referred to in paragraph (5) includes with respect to each doubtful loan—

a.     the name of the borrower;

b.    the amount of the loan; and

c.     the amount of any allowance made pursuant to this Regulation.

7.     Where a credit union determines that the allowance for doubtful loans required by paragraph (2) will result in a net loss on its income statement for the financial year, it shall immediately notify the Registrar in writing of that fact.



Co-Operative Societies Act 2008 Back




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