KATHMANDU: The Department of Cooperatives of the Federal Government, which is responsible for monitoring cooperatives and taking action against erring entities and directors, has been found to be limited to issuing instructions rather than enforcing them.

Recently, on June 13, the department issued a notice instructing that individuals maintain membership in only one cooperative of the same nature at the local level. According to Subsection (1) of Section 32 of the Cooperatives Act, 2074 (2017), a person cannot be a member of more than one cooperative of the same nature at the local level. Those who were members of more than one such organization before the Act came into effect were required to choose one membership within three years. If the department had implemented the Act, dual memberships would have ended by October 2020. However, more than three years after this deadline, the enforcement remains limited to departmental instructions.

On June 13, the department directed cooperatives to join the Cooperative and Poverty Alleviation Information System (COPOMIS) and enter specified details within one month. Section 73 of the Cooperatives Act, 2074 mandates that cooperatives must be affiliated with COPOMIS. However, due to non-compliance, the government lacks reliable data on cooperatives.

The Cooperatives Act empowers the registrar of the department to impose fines of up to Rs 500, 000 on non-compliant organizations and individuals. Despite this, no action has been taken against cooperatives or directors.

Pitambar Ghimire, the department's registrar, stated that the law entrusts the Department of Cooperatives and the registrar with both promotional and punitive responsibilities. Therefore, the department is hesitant to take action directly as it is also responsible for the promotion of cooperatives, argues Ghimire.

Last November, following recommendations from the Cooperative Reform Suggestion Task Force, the department issued a notice instructing cooperatives to submit a white paper detailing their financial status, including savings, liabilities, investments, assets, and an action plan for returning savings, within one month. However, cooperatives have not complied with these instructions either.

Previously, on February 13, 2022, the department issued an 88-point integrated directive, instructing cooperatives to implement the Act's provisions and regulations. Three months later, it also issued a 35-point instruction, which included a directive for elected representatives to resign from the post of cooperatives’ director and a provision allowing only 49% of directors to manage loans. These directives also remain unenforced.

In March, the department in collaboration with Nepal Rastra Bank monitored 19 cooperatives but did not impose fines or take action against those in violation. Instead, the department merely instructed these organizations to rectify their problems.

A cooperative stakeholder noted that due to the department's inefficacy, there is a growing demand for a separate regulatory body to monitor cooperatives.

The department has failed to implement numerous provisions of the Cooperatives Act. Structures envisioned in the Act, such as the Cooperative Credit Information Center, Debt Recovery Tribunal, and Credit and Deposit Protection Fund, have not been established even six years after the endorsement of the Act.