Government Unveils Sweeping Reform Blueprint to Resolve Cooperative Crisis

Kathmandu — The government has introduced a comprehensive reform framework titled the “Good Governance Roadmap 2082,” aiming to address the deepening crisis in Nepal’s cooperative sector. The roadmap, made public on Sunday, outlines a multi-layered strategy focused on depositor protection, institutional restructuring, legal enforcement, and technology-driven supervision. The move comes at a time when billions of rupees belonging to savers remain trapped in troubled cooperatives across the country, triggering widespread public concern and eroding trust in the system.

At the heart of the reform plan is a strong emphasis on safeguarding small depositors. The government has proposed that individuals with savings of up to Rs 500,000 in problematic cooperatives be identified and reimbursed on a priority basis through a dedicated Deposit and Credit Protection Fund. The roadmap envisions a legally backed guarantee mechanism, ensuring that even if recovery from seized assets falls short, eligible depositors will still receive their funds up to the specified threshold. This approach reflects an attempt to restore immediate confidence among the most vulnerable segment of savers.

To facilitate liquidity and ensure timely repayments, authorities are also considering the issuance of cooperative bonds if necessary. For depositors holding amounts above Rs 500,000, the plan suggests a proportional distribution mechanism based on available resources, along with the creation of a priority ranking system. Notably, the roadmap proposes strict legal oversight on operators of troubled cooperatives, including monitoring their business activities and income streams until all depositor liabilities are settled.

Institutional restructuring forms another key pillar of the reform agenda. The roadmap recommends dissolving the existing Department of Cooperatives and replacing it with an autonomous Cooperative Regulatory Authority endowed with quasi-judicial and executive powers. This new body would have sweeping authority, including the ability to freeze bank accounts, suspend passports, confiscate assets, and auction properties of individuals found guilty of financial misconduct. Such provisions indicate a shift toward stronger enforcement and accountability mechanisms within the sector.

In addition, the government plans to establish dedicated task forces for each problematic cooperative, ensuring targeted intervention and faster resolution. A long-term structural solution is also proposed through the creation of an Asset Management Company model to systematically manage and recover distressed assets. The roadmap further emphasizes the need to strengthen regulatory capacity by mandating the inclusion of experts in financial analysis, forensic auditing, and cyber regulation within oversight bodies.

A significant reform measure involves redefining jurisdiction across Nepal’s federal structure. Cooperative institutions will be categorized based on their transaction size, with smaller entities regulated at the local level and larger ones falling under provincial or federal oversight. An automated system for upgrading or downgrading institutional status based on financial thresholds has been proposed, alongside the establishment of a unified digital server to enable real-time data sharing among different levels of government. This is expected to reduce regulatory fragmentation and improve coordination.

Legal reforms outlined in the roadmap aim to tighten operational boundaries and reduce systemic risks. The introduction of a “one person, one cooperative” policy, limits on individual savings exposure, and restrictions on federations from engaging in deposit and credit activities reflect an effort to curb misuse of cooperative structures. The roadmap also calls for a mandatory merger policy for weak institutions and strict enforcement of anti-money laundering and counter-terrorist financing standards to prevent the sector from being used for illicit financial activities.

On the technological front, the government intends to integrate cooperative systems with banking and regulatory databases, making platforms like COPOMIS mandatory for real-time monitoring. Institutions providing false data could face transaction restrictions, while cooperatives will be encouraged—or required—to direct investments toward productive sectors rather than speculative areas such as real estate or stock markets. Additional measures include enforcing international financial reporting standards, publishing quarterly financial disclosures, and revoking licenses of institutions that fail to undergo audits for three consecutive years.

Despite the ambitious scope of the roadmap, its success will ultimately depend on implementation. Nepal’s cooperative sector has long suffered from weak enforcement, political interference, and regulatory gaps, which have allowed systemic risks to accumulate over time. While the proposed measures signal a strong policy intent to reform the sector, analysts caution that without consistent execution, institutional integrity, and political commitment, the reforms may struggle to deliver the intended outcomes.

In essence, the Good Governance Roadmap 2082 represents one of the most comprehensive attempts yet to stabilize Nepal’s cooperative system. If effectively implemented, it could not only resolve the current crisis but also lay the foundation for a more transparent, accountable, and resilient cooperative sector.