National Cooperative Regulation Authority Enters Second Year Amidst Challenges of Manpower and Legal Gaps

Kathmandu. The National Cooperative Regulation Authority has entered its second year. The authority, established on Magh 14, 2081, through the Cooperative Ordinance, is preparing to celebrate its first anniversary.

The authority was established as the second-tier regulatory body for the regulation of savings and credit cooperatives, based on the recommendations of the special investigation committee formed by the then parliament to resolve issues seen in the cooperative sector.

However, due to wrong expectations beyond its objectives, lack of legal management, and unclear criteria regarding its regulatory scope, the authority has been in a state of confusion for a year. Chairman Khagaraj Sharma admits that although they have tried to work within the rules, laws, and jurisdiction given to the authority, they have not been able to meet public expectations.

When the cooperative crisis peaked, the general public and depositors had high expectations from this authority. Nevertheless, Chairman Sharma states that despite efforts to resolve market problems over the past year, the results have not been as expected.

He mentioned that while the management of cooperatives declared problematic is not under their direct control, managing cooperatives that are in a problematic state remains challenging due to a lack of laws and manpower. He stated that currently, about 300 to 500 cooperatives are facing such issues.

Manpower Shortage: No O&M Survey, Government and Central Bank Not Sending Staff

The authority does not face a shortage of its own land and buildings as it has taken over the structure of the National Cooperative Development Board, which was dissolved before the authority's formation. However, limited laws and a shortage of manpower have emerged as the main obstacles.

So far, an O&M survey to determine the required number of employees for the authority has not been conducted. There was a plan to operate by bringing employees on deputation from the Government of Nepal and the Nepal Rastra Bank on an interim basis.

Initially, a plan was made to manage 74 personnel for the authority, of which 43 were supposed to come from other bodies of the Nepal Government. As of now, only 14 employees have arrived from the Nepal Rastra Bank and the civil service. The authority stated that the executive manpower available is only one-third of what was designated.

Legal Hurdles: Authority Lacks Power to Recommend Action

Even with staff, the authority is currently not in a position to do much. The reason is the lack of laws. Although the government formed the authority by making special provisions in the Cooperative Act, it has not granted clear legal authority to it. Chairman Sharma states that the lack of legal provisions is felt in field monitoring and other tasks, making the authority like a 'toothless tiger'.

The authority conducts on-site monitoring of some cooperatives based on complaints, but it does not have the authority to freeze assets or collateral if irregularities are found in those cooperatives. Furthermore, the authority does not even have the power to write to the police to initiate action. In contrast, the Nepal Rastra Bank, the Department of Cooperatives, or the Registrar have provisions to write to the relevant bodies for necessary investigation.

Minor Progress in Registration and Documentation

The authority has achieved minor progress in the documentation of cooperative institutions. The authority stated that 250 cooperatives have received documentation certificates since the registration documentation work began on Mangsir 10. Additionally, about 2,000 cooperatives have submitted their details, which are currently in the documentation phase, according to the authority's statistics.

The number of entities showing interest in documentation so far is around 5,000. Sharma mentions that employees are being mobilized even on holidays and overtime to expedite the registration process. He notes that interest in documentation is high because cooperative institutions will only be able to join the Credit Information Center after this documentation is complete.

Jurisdictional Conflict and Duplication

Another current problem is the duplication of the authority's jurisdiction. Ambiguity regarding the jurisdiction of the Department of Cooperatives and the Authority, especially concerning regulation, has created confusion.

Currently, the authority has been given regulatory power, but none of the powers previously held by the Department of Cooperatives or the relevant provincial and local level branches have been curtailed. Sharma explains that the functional duplication between the two bodies leads to confusion over who should do what.

During this period, the authority has recommended 16 cooperatives to the Ministry of Cooperatives and Poverty Alleviation to be declared problematic. These mainly include institutions operating within the Bagmati Province, Kathmandu Metropolitan City, and Lalitpur Metropolitan City. However, due to the uncertainty over who will declare them problematic and how the subsequent management will be handled, those cooperative institutions have not yet been declared problematic.