Nepal’s National Cooperative Regulatory Authority has introduced new restrictions aimed at strengthening governance and reducing potential conflicts of interest in savings and credit cooperatives.

Under the new directive, cooperatives will not be allowed to operate their offices from houses owned by their operators, chief executive officers (CEOs) or their relatives.

Cooperatives already operating from such properties have been given six months to relocate their offices.

What does the new rule say?

The provision prohibits cooperatives from renting properties owned by their own operators, CEOs or family members for office operations.

The measure effectively separates the cooperative’s office arrangements from the private property interests of people involved in running the institution.

The authority’s directive is part of the amended regulatory standards governing cooperatives whose main business is savings and credit transactions.

Why is the restriction important?

Using a property owned by a cooperative official can create questions about how rent is determined, whether the transaction is commercially reasonable and whether the institution’s decision-making process is independent.

Nepal’s Cooperative Act already contains provisions concerning conflicts of personal interest in cooperative decision-making. The law restricts directors from participating in decisions involving their personal interests and from carrying out acts of a cooperative that provide benefits only to themselves.

The new office-rent restriction provides a more specific regulatory safeguard for savings and credit cooperatives.

Six months to relocate

Cooperatives currently operating from properties belonging to their operators, CEOs or relatives must move their offices within six months.

The transition period gives affected institutions time to identify alternative premises and complete the relocation without an immediate interruption to their services.

The authority has not indicated that all existing arrangements are necessarily evidence of wrongdoing. Rather, the rule establishes a standard intended to prevent potential conflicts between institutional expenditure and private interests.

Prior approval for new or changing cooperatives

The new standards also introduce a prior-approval requirement for savings and credit cooperatives seeking to register or change their institutional objectives when savings and credit activities constitute their main business.

Applicants will have to submit their proposals to the National Cooperative Regulatory Authority for approval.

The application process will include a recommendation from the relevant local government level.

Five-year business plan required

Proposed cooperatives will also have to submit a business plan covering at least five years.

The plan is expected to provide regulators with a clearer picture of the institution’s proposed activities, financial model and operating strategy before approval.

Applicants must also commit to meeting the prescribed qualifications for directors, members of the account supervision committee, managers and employees.

Members cannot belong to similar cooperatives

The revised standards require proposed cooperatives to declare that their members are not members of other cooperatives of a similar nature.

The proposed cooperative’s area of operation must also have geographical continuity.

These requirements are intended to bring greater clarity to membership and operational boundaries in the savings and credit sector.

Authority to examine feasibility before approval

The regulatory authority will assess the feasibility of proposed cooperative operations before granting approval.

Its assessment can include on-site inspections of office infrastructure, arrangements for protecting members’ savings, market conditions and potential investment areas.

This gives the regulator a role beyond simply reviewing documents submitted with an application.

Part of wider cooperative-sector reforms

The latest rules come as Nepal strengthens oversight of the cooperative sector following years of problems involving governance, supervision, financial irregularities and difficulties faced by depositors seeking to recover their savings.

A government investigation commission released in May identified weak regulation, poor governance and inadequate oversight among factors contributing to the cooperative crisis.

The National Cooperative Regulatory Authority has subsequently been expanding its regulatory framework for savings and credit cooperatives, including registration, licensing and supervisory standards. The authority has described the sector as facing significant longstanding problems and has been developing additional policies and standards.

What the new rule means for cooperatives

For cooperative operators, the changes mean that office premises can no longer be treated simply as a private property arrangement with the institution.

Affected cooperatives will need to relocate if their current offices are owned by their operators, CEOs or relatives.

For new institutions, the approval process will require more information about their business plans, membership, management qualifications, infrastructure and intended areas of operation.

The changes reflect a broader shift toward more formal supervision of Nepal’s savings and credit cooperatives, with greater emphasis on transparency, institutional separation and regulatory oversight.