Uncertainty looms over the return of public savings trapped in cooperatives as their liabilities exceed assets. The inability to recover loans and investments has fueled doubts about whether the depositors’ funds will be returned.
A special parliamentary committee, formed to investigate the misuse of savings in cooperatives, has also indicated in its report that there is little likelihood of returning the savings from the problematic cooperatives.
The committee conducted analysis of 22 cooperatives that were declared problematic and 40 others that had been publicly questioned. While these institutions had liabilities amounting to Rs 87.82 billion, their assets, including loans and investments, were only valued at Rs 82.32 billion. The committee's report noted weak prospects for recovering loans, interest, other investments, and non-banking assets.
The general public has made claims of around Rs 50 billion in cooperatives declared problematic by the federal government. According to both formal and informal data, more than 500 cooperatives across the country are facing issues that prevent them from returning the savings of the depositors. These cooperatives owe more than Rs 200 billion to the general public in savings refunds.
More than 300 depositors from these cooperatives, unable to retrieve their savings, have been staging a phased protest under the banner of the National Federation for the Protection of Depositors. The protest, which began in March, has been temporarily suspended after the government signed its third agreement with them last August.
The government has responded by either investigating cooperatives based on members' complaints and initiating legal actions or declaring the cooperatives as problematic and handing over their responsibility to the Problematic Cooperative Management Committee. This committee then oversees the sale of cooperative assets to return public savings. However, the parliamentary committee has concluded that neither model appears capable of refunding the depositors’ money.
The committee also noted that simply imprisoning cooperative operators does not provide justice to the depositors. It has recommended the government freeze the bank accounts and passports of operators of problematic cooperatives and set a deadline to resolve the issues. Additionally, the committee suggested issuing bonds under a government guarantee to refund savings up to Rs 500,000 and recover the rest through loan recovery process.
To ensure the immediate return of smaller depositors’ funds, the committee has recommended that the state invest in the refunds and recover the money later. Issuing internal bonds under government guarantee was proposed as one option to raise the necessary funds.
The federal government’s budget for the fiscal year 2080/81 (2023/24) has a provision to refund up to Rs 500,000 to the depositors by keeping the assets of cooperative operators and their families as collateral. However, a senior official at the Department of Cooperatives stated that no steps had been taken to implement this announcement.
"There has been no preparation to move forward with the announcement to refund savings up to Rs 500,000 as mentioned in the budget," the official said.
The committee has also suggested forming an asset management committee. Noting that cooperative operators claimed they could refund savings from their assets during investigations, the committee recommended creating a public company-style asset management company to handle the issue. Nepal Rastra Bank, in its monetary policy for the current fiscal year, also announced plans to form such a company to manage the assets of banks.
The parliamentary committee also remarked that the current management process for problematic cooperatives adopted by the government has not been effective. It recommended deploying technical teams and opening offices in the field in a “takeover” style.
Former judge Gauri Bahadur Karki, who previously chaired the management committee, said forming separate committees for each problematic cooperative could expedite the refund process. "The current management committee is merely a place to give jobs to ministers' workers," he remarked. "Separate committees with technical staff for each problematic institution could resolve the issues more quickly."
A task force led by Dr Jayakanta Raut, formed last year, also recommended the government sell the assets of cooperative operators to return the full savings amount by the end of April. Although the Department of Cooperatives had instructed cooperatives to submit white papers on the institutions' savings, liabilities, investments, and assets, as well as action plans for refunding the savings and details of operators' and managers' assets, the cooperatives are yet to comply with the instruction.
