Pokhara, 26 December| In a shocking revelation of regulatory negligence, the National Cooperative Regulatory Authority has been found aiding the Nepal Federation of Savings and Credit Cooperative Unions (NEFSCUN) in concealing massive financial irregularities within its annual statements. The Authority, bypassing the mandatory guidelines of the Nepal Rastra Bank (NRB) and the Cooperative Act 2017, revised its regulatory standards to allow NEFSCUN to provision only 50 percent for its non-banking assets until mid-July 2026. This move has allowed the federation to bypass the 100 percent provisioning requirement strictly mandated by the central bank for institutions handling transactions exceeding NPR 500 million, thereby facilitating a significant manipulation of its financial health.
The audit report for the fiscal year 2024/25 reveals that NEFSCUN’s non-banking assets have soared to NPR 2.31 billion, accounting for nearly 10 percent of its total assets. Under standard regulatory frameworks, such assets must be fully covered by loan loss provisions. However, the Authority issued a formal letter to NEFSCUN, interpreting the rules in a manner that provided a loophole to hide potential losses. While Authority Chairman Dr. Khagendra Sharma claims the revision was intended to facilitate cooperatives during difficult economic times, critics argue it is a targeted intervention to shield NEFSCUN from showing a massive deficit. This lack of transparency has raised alarms among millions of individual depositors whose life savings are channeled through the cooperative movement.
Previous audits had already indicated that NEFSCUN failed to maintain a required provision of NPR 4.17 billion in the fiscal year 2023/24, leading to an adverse opinion from auditors. With the latest regulatory ‘exemption,’ the federation continues to ignore a liability of approximately NPR 3.61 billion. By violating the Cooperative Act’s Section 103(J), which mandates adherence to NRB directives, the Regulatory Authority has essentially legitimized financial window-dressing. This systemic failure of the regulator to enforce accountability within the apex body of saving and credit cooperatives threatens to deepen the ongoing crisis in Nepal’s cooperative sector, making it difficult to restore public trust in these financial institutions.
