Lack of Government Support Hinders Return of Savings to Cooperative Members

June 16, Kathmandu – According to legal provisions, cooperatives victims must have their cooperative declared distressed by the government-established revolving fund to recover their savings. However, government bodies have reportedly been reluctant to declare cooperatives as distressed, even when these organizations have defrauded savers for years. Declaring a cooperative distressed is crucial as it allows for the sale of the operators’ assets to recoup funds. Despite this, cooperative operators often use their influence to delay such declarations.

An illustrative case involves cooperatives linked to GB Rai, whose group has reportedly defrauded more than 2.1 billion NPR through over a dozen cooperatives. Rai himself has been absconding for years. Among these, only the cooperative Hamarro Krishi, which has the smallest amount of savings, has been declared distressed; other cooperatives have yet to reach that status.

The only viable way for affected cooperatives to refund savings is through a distressed status declaration, which permits asset sales. When cooperatives fail to return savings and operators disappear after financial misconduct, law stipulates declaring the cooperative distressed as the legal basis for repayment. The government has favored recovering funds through debt collectors rather than restarting such cooperatives. Following a distressed declaration, operators may be arrested and their assets liquidated, leading to efforts to influence various political and governmental officials to prevent or delay these decisions, according to complaints from affected savers.

A victim expressed that the political protection cooperative operators receive has exacerbated their difficulties. “The only strong measure we have to recover our funds is through a distressed declaration,” the affected saver said. “Even state mechanisms seem to be influenced by these cooperative fraudsters, causing more pain to savers.” As per law, if 25 members of a cooperative lodge a complaint with the registrar regarding failure to refund savings on time, the cooperative should be recommended for a distressed declaration under the Cooperative Act. However, when such complaints are submitted to relevant ministries, departments, or the National Cooperative Regulatory Authority, files are often returned without action, victims claim.