Kathmandu, July 14: The government has enacted the Cooperative (First Amendment) Act, 2026 BS (2083), introducing sweeping reforms aimed at resolving the long-standing crisis in the cooperative sector, including financial mismanagement, embezzlement of depositors’ funds and weak regulation.
The amended law gives greater authority and autonomy to the National Cooperative Regulatory Authority to oversee savings and credit cooperatives more effectively.
Under the new provisions, all cooperatives primarily engaged in savings and credit transactions must obtain an operating licence from the authority and renew it annually. Institutions that fail to obtain a licence within one year of the law coming into effect, or violate regulatory directives, risk having their licences suspended and operations halted.
The amendment also broadens the legal definition of “family” and “relatives” to prevent those accused of embezzling cooperative funds from hiding assets under the names of close associates. The expanded definition now covers a wider circle of relatives, including uncles, maternal uncles, sons-in-law, brothers-in-law, sisters-in-law and even separated in-laws, allowing authorities to freeze and recover assets transferred to them.
Even before a cooperative is officially declared troubled, the registrar or regulatory authority can now freeze the movable and immovable assets, bank accounts and shares of directors, managers, borrowers and former officials suspected of involvement in financial misconduct. The law also authorises authorities to impose travel bans on such individuals.
To provide immediate relief to depositors affected by the collapse of troubled cooperatives, the government will establish a revolving relief fund under a management committee. The fund will be financed through government allocations, recoveries from the assets of troubled cooperatives and other sources.
Significantly, the law allows the government to provide additional funds if the assets of a troubled cooperative are insufficient to fully reimburse depositors.
The fund will operate through a separate account at a Class A commercial bank and will not lapse at the end of the fiscal year. It can be used only for refunding depositors’ savings.
The amended law also prohibits district, provincial and central-level cooperative unions from directly conducting savings and credit businesses. Existing unions engaged in such activities have been given a three-year transition period to either merge or integrate with an existing cooperative bank.
The law further requires cooperatives to base lending rates on the reference interest rate and caps penalty charges at no more than five per cent of the outstanding interest due, providing some relief to borrowers.
The amendment is regarded as the government’s toughest legal intervention in the cooperative sector to date. With provisions allowing asset freezes, travel restrictions and, when necessary, police assistance to bring suspects before authorities, the law is intended to strengthen accountability and improve protection for depositors.
People’s News Monitoring Service
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