Autonomy of Cooperative Regulatory Authority Under Scrutiny After Board Restructure

The government-run National Cooperative Regulatory Authority, created to address problems in savings and credit cooperatives and ensure effective regulation, is facing growing criticism over increasing government control, raising concerns about its independence.

Although the Cooperative Act defines the authority as an autonomous, self-governed and organized body, recent legal amendments have been accused of undermining this status by tightening ministerial oversight and effectively turning it into a department or branch under the ministry.

The government recently amended the Cooperative Act, 2017 through an ordinance, introducing changes to the authority’s structure and powers. The governing board has been expanded from five to seven members.

Under the revised provisions, the registrar of the Department of Cooperatives and the executive director of the authority have also been included in the board. With this change, government representation within the body has increased significantly. Of the current structure, four members are directly linked to the government, including three officials at the joint secretary level from the ministry.

Stakeholders say this arrangement raises serious questions about the authority’s independence. “Although it is described as an autonomous body, in practice it is being turned into a ministry unit,” said a board member, expressing dissatisfaction. “This structure will increase direct ministerial interference and obstruct independent functioning.”

The ordinance also requires the authority to seek government approval while issuing or amending regulations, further tightening administrative control. An amended provision under Section 149 states that the authority may revise regulations only in accordance with the Act and rules, and with the approval of the Government of Nepal.

Experts warn that such provisions could limit policy independence, slow down decision-making, and increase the risk of political influence. “Requiring ministry approval for regulatory changes invites interference,” the board member added.

The Act also stipulates that only the ministry can declare a cooperative institution problematic if it fails to return savings, while the authority can only recommend such action based on complaints and investigations.

The government first introduced the ordinance amendment in December-January 2024/25 after rising problems in cooperative regulation and supervision. The authority was subsequently formed in early 2025. Since its formation, it has issued standards for savings and credit cooperatives and licensed around 3,000 institutions, while about 11,000 others are currently in the licensing process.

The latest ordinance has also expanded the authority’s mandate. It grants it the power to issue licences for savings and credit operations, set regulatory standards and directives, and conduct monitoring, inspection and supervision.

It also clearly delineates the roles of the Department of Cooperative and the Regulatory Authority, addressing previous jurisdictional overlaps and disputes between the two bodies.

Additionally, the authority has been given powers to facilitate loan recovery, order the return of depositors’ savings within a specified timeframe, and seek assistance from agencies such as the Nepal Police to enforce compliance. It may also freeze movable and immovable assets of cooperative operators who fail to comply and impose travel bans on concerned individuals.

A mutual evaluation report by the Asia Pacific Group on Money Laundering (APG) had previously flagged weak regulation of savings and credit cooperatives. Following the report, the government quickly amended the law through an ordinance to establish the authority.

There are currently around 33,000 registered cooperative institutions across the country.