Nepal cooperative depositors get money back, but many still unsure of refunds

The Nepali government has initiated the return of savings to depositors of officially declared troubled cooperatives, providing much-needed relief to thousands of victims since mid-May. This move, however, offers little solace to a significantly larger group of depositors whose money is trapped in hundreds of other cooperatives facing financial crises but not yet formally recognized as 'troubled' by authorities.

While the Problematic Cooperatives Management Committee prioritizes refunds for formally designated institutions, victims and experts argue that this policy excludes a vast number of collapsed cooperatives whose operators have absconded. Organizations representing cooperative victims estimate that over 500 institutions nationwide have ceased returning deposits without official classification, leaving their depositors outside the government's refund program. Kushal KC, central president of the National Campaign for the Protection of Cooperative Depositors, stated that over 500 affiliated cooperatives are effectively in crisis, with operators having disappeared, yet the government remains silent on their plight.

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As of today, more than 500 cooperatives that have failed to return depositors' money have not been declared troubled. Many of their operators have absconded, yet the government says it will only refund deposits from officially declared troubled cooperatives. The government has remained silent about the rest. It must introduce a policy that also guarantees refunds for depositors of these institutions.

Victims and advocates contend that the current refund process lacks comprehensiveness and fairness. Although the management committee claims to prioritize small depositors with savings up to Rs10,000, many affected families report a lack of transparency and clear distribution criteria. KC highlighted that available funds belong equally to all depositors and should be distributed proportionately, rather than paying some in full while others receive nothing. The absence of publicly available standards exacerbates confusion, and KC warned that policymakers responsible for the distribution mechanism should bear responsibility if recovered assets prove insufficient. Complaints received by the National Cooperatives Regulatory Authority further indicate the problem extends far beyond the officially recognized troubled cooperatives.

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Depositors are dissatisfied because the process has not been just. The available funds belong equally to all depositors. Whatever amount is recovered should be distributed proportionately instead of paying some people in full while others receive nothing.