Kathmandu, May 29: A government commission investigating irregularities in the cooperative sector has concluded that failure by state regulatory bodies played a central role in deepening the crisis and has recommended action against 19 officials, including former registrars of the Department of Cooperatives.
The report said multiple regulatory agencies existed but failed to perform effectively, allowing misuse of depositors’ funds and weakening oversight across the sector.
It found that officials in cooperative regulatory institutions approved registrations, expansions, mergers and service centres without properly assessing financial capacity, feasibility or necessity. These decisions, the commission said, contributed to unchecked growth and rising risks in the sector.
The commission also pointed to weak supervision, poor data management and limited institutional capacity within the Department of Cooperatives and related agencies.
It noted that many cooperatives operated beyond their designated areas, while operators engaged in risky lending practices, excessive exposure to single borrowers, dual accounting, and inadequate loan loss provisioning.
The report further said the Cooperative and Poverty Management Information System (COPOMIS), though operational, contained incomplete, outdated and unreliable data, limiting its effectiveness in regulation and policy decisions.
Weak coordination among federal, provincial and local governments created regulatory confusion, and monitoring and inspection systems remained ineffective.
The commission recommended immediate intervention in troubled cooperatives, suspension of new registrations and service centre approvals, and merger of cooperatives with transactions up to Rs 100 million.
It also suggested reforms including risk-based supervision, mandatory digital accounting, fixed tenure for cooperative directors, and stronger regulatory enforcement.
For long-term restructuring, it proposed classifying cooperatives into three tiers: large cooperatives with investments above Rs 1 billion, medium cooperatives between Rs 250 million and Rs 1 billion, and small cooperatives up to Rs 250 million, with phased oversight based on size.
The commission recommended detailed investigation and possible action against 19 officials for negligence and unlawful decisions that, it said, worsened the crisis and exposed systemic regulatory failure.
People’s News Monitoring Service.
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