KATHMANDU: Amid rising complaints about cooperatives failing to return depositors' money, the police have concluded that these problematic cooperatives are unlikely to do so. The police noted that weaknesses in cooperative registration, poor record management, and insufficient monitoring have contributed to the problem. Police officials emphasized that police investigation alone cannot resolve the issues in the cooperative sector or ensure the return of depositors' money. High-ranking police officers suggested that the government needs to adopt different strategies to solve these issues and return the deposits of the general public.

Home Ministry Secretary Ek Narayan Aryal, Inspector General of Police Basanta Bahadur Kunwar, Central Investigation Department (CIB) Chief Shyamlal Gyawali, and Crime Investigation Department Chief Tek Bahadur Tamang made these remarks during a discussion organized by the Parliamentary Special Committee, formed to investigate the misappropriation of savings by cooperatives, on Friday.

Inspector General of Police Kunwar informed the committee that the likelihood of recovering savings from the problematic cooperatives is very low.

"Due to the failure of regulatory bodies to effectively oversee the cooperative sector, deposits have been embezzled and misused since registration," he said.

According to the police, 55,410 victims have filed 5,300 complaints about not receiving their money back from cooperatives. Out of these, 98 complaints have led to investigations and registered cases, claiming a total of Rs 11.66 billion, the police officials informed the parliamentary committee. The police have arrested 294 out of 1,150 defendants, while 856 are still absconding.

In the committee meeting, Inspector General Kunwar explained that directors of cooperatives took loans by mortgaging property acquired from savers in the bank. When the bank auctioned these properties at low prices, it put the cooperatives’ savings at risk. He also suggested forming a separate Financial Crime Control Bureau, noting that the police lack skilled manpower to investigate financial crimes.

About a decade ago, a commission of inquiry headed by Gauri Bahadur Karki recommended forming a commission to return depositors’ money. The commission suggested study of troubled cooperatives, property search, and auction. Following the Karki Commission's suggestion, the Cooperatives Act of 2074 established a problematic cooperative management committee to investigate the assets of troubled cooperatives and settle their liabilities.

On January 13, 2018, the Federal Government formed the 'Problematic Cooperative Management Committee.' Over six years, the committee has seen four chairpersons replaced and has been tasked with resolving 21 problematic institutions, but none have been fully resolved. Nine cooperatives are under separate police investigations.

To address the problems of cooperatives, the government formed a task force headed by a member of the National Planning Commission last year. The task force, coordinated by Jayakant Raut, recommended that cooperatives engaging in large transactions should be monitored by the central bank. The report submitted to Prime Minister Pushpa Kamal Dahal last September also suggested forming a second-tier regulatory body for monitoring cooperatives and classifying them based on problems. It also recommended establishing a credit information center, and a debt recovery tribunal. However, these recommendations have not been implemented.

Recently, Swarnalakshmi Cooperative and various other cooperatives were involved in the Gorkha media network scandal, implicating Deputy Prime Minister and Home Minister Ravi Lamichhane. Consequently, a parliamentary inquiry committee was formed to investigate 29 cooperatives, including 20 identified as problematic. Surya Thapa, chairman of the committee, stated that the cooperative issue is linked to the entire financial system and the banking sector and therefore the committee will discuss the matter with stakeholders.