September 12: While the debate is going on about the formation of 'Second Tier Institution (STI)' to monitor and supervise savings and credit cooperatives, Nepal Rastra Bank (NRB) is under increasing pressure to monitor the cooperatives with large transactions.

The government has mentioned in the budget for the current fiscal year that specialized regulatory agencies will be established and put into operation to make the regulation and supervision of cooperatives effective.

Associations and federations of cooperatives are also 'lobbying' for the formation of a separate regulatory body in line with the budget announcement. This issue was also discussed by the Cooperative Sector Reform Suggestion Taskforce. However, after the Asia Pacific Group (APG) under the Financial Action Task Force (FATF), an organization working to prevent money laundering, mentioned in its report that the monitoring of large trading institutions should be done through the central bank, Nepal Rastra Bank is under pressure to undertake the job.

In the mutual evaluation report published by APG recently, it has been mentioned that the cooperatives whose main transactions are savings and loans of more than Rs 50 million annually should be monitored and supervised by the Department of Cooperatives, the central bank and the financial information unit.

Tolraj Upadhyay, the spokesperson of the Department of Cooperatives, says that the APG report is only a suggestion for the government and its implementation is not binding.

"After APG suggested, the government is under moral pressure, but there isn’t any obligation to implement the suggestion," he told New Business Age. He said that the monitoring body of cooperatives is being discussed in the ministry.

Last November, the APG, which had conducted an on-site study, submitted a report to the government stating that the monitoring and supervision of cooperatives was weak and the risk of preventing money laundering was high. Based on the report, the government in January registered a bill in Parliament to amend some laws related to prevention of money laundering and promotion of business environment.

Meenraj Kandel, president of the National Cooperative Federation, says it would be more effective to form a separate organization to monitor cooperatives instead of giving the responsibility to the central bank.

Due to the lack of effective monitoring and supervision of these institutions, the savings of common people are at risk. Sudarshan Dhakal, the former registrar of the Department of Cooperatives, says that Nepal Rastra Bank cannot shy away from the responsibility of monitoring cooperatives.