The High-Level Economic Reform Recommendation Commission has stated that the government needs to allocate a budget of around Rs 10 billion to refund the savings of the general public trapped in troubled cooperatives.
In the current fiscal year's budget (2024/25), the government announced a provision to refund savings up to Rs 500,000 by securing the assets of the operators and their families of troubled cooperatives as collateral.
Although the interim report had recommended government loans to facilitate the refund of cooperative deposits, the final report suggests that the government should provide funds to the Problematic Cooperative Management Committee, with the understanding that the amount will be reimbursed later.
According to the committee’s data, the general public has deposited around Rs 26 billion in the 22 cooperatives that have been officially declared problematic. The committee estimates that the government needs to allocate approximately Rs 10 billion to enable refunds of up to Rs 400,000.
Even though the government had announced in the budget to provide loans, no process has been initiated to implement this declaration, said a senior official at the Ministry of Land Management, Cooperatives and Poverty Alleviation.
"Suggestions from experts and government plans to refund cooperative depositors through loans from state funds remain confined to speeches and documents," said the official on condition of anonymity. "We made announcements, but no concrete action has been taken to implement them."
The Parliamentary Special Investigation Committee on Cooperative Deposit Misuse has also suggested in its report that the government issue bonds under state guarantee to raise funds to refund small depositors.
Earlier, a task force led by former National Planning Commission member Dr Jayakant Raut had also recommended concessional loans to address liquidity problems seen in non-performing cooperatives. However, the government has yet to allocate any budget specifically to address the crisis in the cooperative sector.
Minister for Land Management, Cooperatives and Poverty Alleviation, Balram Adhikari, has repeatedly said that the savings should be refunded by selling off the assets of troubled cooperatives and their operators.
Both formal and informal data collected indicate that more than 500 cooperatives across the country are currently unable to refund savings, with these institutions collectively owing over Rs 200 billion to the general public.
Depositors of more than 300 cooperatives, whose funds have not been returned, are engaged in a phased protest. Despite three agreements between the government and the protestors since last August, no refunds have been made yet.
Although the government amended the law via ordinance to form a National Cooperative Regulatory Authority, it has not yet become fully operational.
While the government had previously backed away from setting transaction limits for savings and credit cooperatives, the High-Level Economic Reform Recommendation Commission has now proposed limiting the size and scope of cooperatives' operations.
The commission has recommended that savings and credit cooperatives be limited to operating within a single local level and that they be restricted from handling savings transactions exceeding Rs 2.5 million. Previously, the government had amended the Cooperative Act 2074 via ordinance to set a transaction limit between Rs 1 million and Rs 2.5 million based on operational areas. However, this provision was removed due to pressure from cooperative leaders during the replacement bill process.
The commission has stated that the expansion of cooperatives against their core principles, along with the provision allowing national-level operations, has led to problems due to branches opening in large cities. The commission has also recommended instructing cooperatives with multiple branches to settle their accounts and shut down excess branches.
