Governor blames regulatory loopholes for cooperative crisis

According to one of the committee members, the preliminary findings of the parliamentary special commission of inquiry into cooperatives affected by the crisis indicate that the cooperative sector is on the brink of collapse.

“Because the government bodies that were supposed to regulate the cooperative sector failed to discharge their duties effectively, the situation got out of our control,” a member of the commission told the Post, speaking anonymously. The commission consists of seven members.

“This problem could pose a challenge to the entire economy,” the member continued. “The inquiry committee has not yet reached a final conclusion.”

The special commission of inquiry, which began its work a month ago, reached its assessment after months of discussions with top officials from government agencies, as well as heads and members of various committees set up by the government to investigate problems related to cooperatives.

The special parliamentary inquiry, which was set up on May 28, was given three months to complete its task and submit a report to the government. It held its eleventh meeting on Monday.

Cooperatives that operate within their defined boundaries function well, the member said. “But those that have overstepped their boundaries have encountered problems.”

After weeks of negotiations between the ruling party and the opposition, a seven-member commission headed by CPN-UML legislator Surya Thapa was set up to investigate the misappropriation of deposits in dozens of cooperatives across the country. Earlier, the Nepali Congress, the main opposition party, had disrupted parliamentary proceedings for months, demanding the establishment of such a commission.

Apart from Thapa, the committee members include Sarita Bhusal of UML; Badri Pandey and Ishwari Devi Neupane of Congress; Lekh Nath Dahal of CPN (Maoist Centre); Shishir Khanal of Rastriya Swatantra Party; and Dhruba Bahadur Pradhan of the Rastriya Prajantara party.

The Commission began developing working procedures on 5 June and investigations began on 18 June.

Numraj Khanal, Undersecretary in the Parliament Secretariat, says that so far the special inquiry committee has tried to understand the conceptual framework of cooperatives after discussing the issue of misappropriation of cooperative funds with various stakeholders.

“During this period, we discussed the matter with officials of the cooperative regulators and law enforcement agencies and tried to understand their findings in the matter,” Khanal told the Post. “Similarly, we discussed the matter with heads and representatives of various committees that the government had set up at different times, starting from 1990.”

Between 1990 and 2024, the Nepalese government set up at least seven different committees to examine the problems of the cooperative sector and recommend solutions.

On Monday, a special parliamentary committee held a discussion with Maha Prasad Adhikari, governor of Nepal Rastra Bank.

Governor Adhikari said the current problem with cooperatives is clearly a result of the government allowing an unlimited number of cooperatives to operate across the country, said Surya Bahadur Thapa, coordinator of the parliamentary inquiry committee.

Thapa added that Governor Adhikari cited several more reasons.

“Allowing cooperatives to operate without defining their geographical boundaries, allowing them to collect deposits without any restrictions and lack of effective regulations are other reasons for the problems visible in the cooperative sector,” Thapa quoted Adhikari as saying.

Adhikari called for the establishment of a strong regulatory body to oversee the sector.

The special commission has not yet started an investigation into Gorkha Media Network, although it falls under its jurisdiction. The media company has been accused of diverting money from various cooperatives to the now-defunct Galaxy 4K TV, where Home Minister Rabi Lamichhane was the managing director.

“The panel is yet to examine the details of the Gorkha Media Network,” Undersecretary Khanal said.

Before this, on July 4, the commission had summoned Home Ministry Secretary Ek Narayan Aryal and Inspector General of Police (IGP) Basanta Bahadur Kunwar, among other officials, to discuss the issues of cooperative societies under investigation.

Apart from Home Minister Aryal and Inspector General Kunwar, Central Investigation Bureau (CIB) chief Shyam Gyawali and Criminal Investigation Department chief Port Bahadur Tamang were also invited to the committee meeting.

Thapa said they discussed the matter in detail with the home minister, inspector general of police and other senior security officials.

According to one of the members, some members of the committee questioned IGP Kunwar about his previous statement in the State Affairs and Good Governance Committee. Addressing a parliamentary committee meeting in the last week of March, the Nepal Police chief claimed that the police had found no evidence of Home Minister Lamichhane’s involvement in cooperative fraud.

“When I gave my statement to the State Affairs and Good Governance Committee about the Home Minister, his involvement in the scam was not revealed,” the committee member quoted Inspector General Kunwar as saying at a special meeting of the committee.

Another member of the inquiry commission, Shishir Khanal, said the IGP had said he was not under any pressure to issue a statement on Home Minister Lamichhane. Khanal is a legislator from the Rastriya Swatantra party led by Lamichhane.

“The IGP stated that he based his statement on facts and that till the date of his statement, no information regarding the involvement of Home Minister Lamichhane in the cooperative scam had been found.”

As part of its efforts to seek input from various stakeholders, on July 2 the committee wrote to all national political parties asking for suggestions on how to resolve the cooperative crisis.

Two weeks earlier, the commission had asked nine cooperatives listed (in Annex 2 of the ToR) to submit details of their financial transactions.

The task of the Select Committee is to examine cooperatives in difficulty, their legal and institutional objectives, financial systems, regulation, supervision and transparency.

Another task of the panel is to recommend measures for the immediate return of savings to depositors of problem cooperatives identified by the Department of Cooperatives and the crisis-affected cooperative management committee.