Unregistered CO-OP’s face transaction freeze and deregistration as Nepal tightens oversight

KATHMANDU: Nepal’s National Cooperative Regulatory Authority (NCRA) has moved toward strict enforcement measures against savings and credit cooperatives that fail to register with the central regulator, warning that non-compliant institutions could face transaction suspensions and eventual cancellation of registration.

The step marks one of the strongest regulatory interventions in the country’s cooperative financial system in recent years, targeting governance risks, depositor protection, and financial transparency across the sector.

The authority had issued a directive on September 26, 2025 (10 Ashoj 2082 BS) introducing standards for the registration and record maintenance of cooperatives primarily engaged in savings and credit transactions. Nearly three months after the call for registration, only about 3,200 savings and credit cooperatives have completed the process with the authority.

Originally, the deadline for registration was set for January 24, 2026 (10 Magh 2082 BS). After witnessing limited compliance, the authority extended the deadline to February 23, 2026 (11 Falgun 2082 BS), signaling concern over low participation despite the regulatory requirement.

Officials say reluctance to register stems partly from the stringent regulatory disclosures required. Cooperatives must meet prudential standards and provide full details of financial transactions, loan portfolios, savings liabilities, governance structure, and audit records.

A cooperative campaigner familiar with the sector noted that many institutions may be avoiding the process to conceal internal irregularities.

“Once under the authority’s system, institutions cannot hide problematic transactions. If all cooperatives registered honestly, problems in nearly one-third of savings and credit cooperatives would surface, and depositors’ savings would be safer,” the campaigner said.

According to NCRA Information Officer Keshavraj Bhattarai, institutions failing to register within the stipulated timeline will encounter operational barriers. “Cooperatives whose main business is savings and credit will face difficulties if they do not register on time,” he said.

Nepal has records of around 32,000 cooperatives nationwide, of which the authority estimates nearly 15,000 fall into the savings and credit category that must come under its direct regulatory framework.

Despite the registration call, many cooperatives appear hesitant due to compliance costs and the risk of exposing financial weaknesses. The Cooperative Act 2017 (2074 BS) assigns the NCRA responsibility for registering and classifying cooperatives whose principal business involves savings and credit, including multipurpose and agricultural cooperatives operating deposit-taking functions.

To operationalize the process, the authority rolled out its registration and record-keeping software system starting November 26, 2025 (10 Mangsir 2082 BS) and began issuing operating permissions through the digital platform.

The regulatory standards specify that cooperatives conducting savings and credit transactions without an NCRA license may face restrictions including collateral registration blocks and mortgage-related administrative non-cooperation.

The authority can also recommend that unregistered institutions be denied tax clearance, barred from membership in the Credit Information Center, and prevented from conducting annual external audits.

More severe enforcement tools include freezing transactions, initiating fraud investigations, and proceeding toward outright deregistration of non-compliant entities.

NCRA Chairperson Dr. Khag Raj Sharma said the authority will fully implement the standards, including cancellation of registration, for cooperatives failing to comply within the deadline.

As of July 15, 2026 (end of Asar 2082 BS), Nepal had 32,965 cooperatives in operation. Of these, 147 fall under federal government regulation, 7,599 under provincial governments, and 25,219 under local governments.

The cooperative movement remains a major pillar of Nepal’s community-based financial system. About 37.40% of Nepal’s population is affiliated with cooperatives. By the end of Asar 2082, total membership stood at 10.905 million, including 54.56% women and 42.47% men, reflecting the sector’s strong role in financial inclusion.

Financially, the sector holds share capital of NPR 143.29 billion, total savings mobilization of NPR 1.125 trillion, and loan investment of NPR 923.74 billion, according to the Ministry of Finance.

Cooperatives collectively provide direct employment to 90,265 people, underscoring their socio-economic footprint in rural finance, SME lending, and grassroots capital formation.

Regulators view the registration drive as part of broader financial sector reform aimed at restoring trust following multiple cooperative fraud cases in recent years.

The integration of cooperatives into a centralized supervisory architecture is expected to enhance credit discipline, improve risk monitoring, and align the sector with Nepal’s evolving financial governance standards.