May 5: Cooperatives that have invested in real estate business, private companies and shares against the policies have started to face crisis. Due to the Covid-19 pandemic, the Russia-Ukraine war, the government's crackdown on real estate sales, as well as the tight monetary policy, the cooperatives have started to face a crisis as they are unable to return the savings of customers.

The Cooperative Act 2074 prohibits cooperatives from investing in real estate and private companies. However, due to lack of effective monitoring, the directors of cooperative have been found investing the deposits in those sectors, rendering them unable to return the savings.

On Monday, Sumeru Savings and Loan Cooperative Society issued a statement saying that due to the economic recession and lack of liquidity, the loan and interest recovery of the institution is very low, the real estate business is low and the deposit collection is almost nil, so the institution could not return the depositors’ money and pay the interest as per the rules.

The organization has appealed to the depositors and shareholders to be patient for the time being as they are in the process of collecting the loans, selling the shares and land of the companies within the Sumeru Group and selling the houses in the name of the company as soon as possible in order to return the money. The cooperative admitted that most of the money has been invested in Sumeru Hospital, Sumeru Mart, Sumeru Printing Press, Asian College among others under the Sumeru Group.

Similarly, Shiva Shikhar Multi-Purpose Cooperative Society at Kaushaltar in Bhaktapur, which has not been able to return the money to the depositors, has also been found to have invested the savings collected from its members in areas prohibited by the law. It has been found that Shiva Shikhar collected savings of Rs 10.5 billion from members and invested only Rs 1.90 billion in loans to members.

The Department of Cooperatives said that the remaining Rs 8.6 billion were invested for opening sister companies in the name of Shikhar Organization. The organization opened department stores in different places of the country under the name of Shikhar Mart and also invested in real estate business.

Cooperatives such as Lalitpur-based Deurali multi-purpose, Meenbhavan-based Kantipur Saving and Credit, Lalitpur's Pashupati multi-purpose, Kathmandu's Gautam Shri have also mobilized large savings into real estate. Oriental Cooperative, which the government declared problematic, also collapsed by investing in real estate. The Civil Cooperative, which is undergoing a similar crisis, was also in trouble due to the investment in real estate.

In Section 50 of the Cooperative Act 2074, it is mentioned that cooperatives should deal with savings and loans by focusing on members. In sub-section 1 of section 50, there is a provision that cooperatives can only accept the savings of their members and give loans only to the members.

Tolraj Upadhyay, the spokesperson for the Department of Cooperatives, which is responsible for the implementation of the Act, argues that the department does not have enough manpower to regularly monitor the cooperatives.

Meanwhile, the government has given the authority for registration of cooperative to their regulation to the local level and state governments. Because the state and local levels are unable to regulate the cooperatives, it has become even more chaotic.