High-level committee to investigate High-level committee to investigate Oriental Cooperative

KATHMANDU, JAN 28 -

The government has decided to form a high-level committee to investigate Oriental Cooperative after receiving daily complaints against it. Depositors have been asking the government to protect their deposits, prompting it to conduct a probe into the troubled cooperative.

The committee will be headed by the deputy governor of Nepal Rastra Bank (NRB). Representatives from the Department of Cooperatives, Ministry of Finance and Ministry of Cooperatives and Poverty Alleviation will sit on the body.

Krishna Hari Baskota, secretary at the Prime Minister’s Office, said a cabinet meeting held on Friday decided to form the committee, and that it would be writing to the authorities concerned soon. “We have been receiving a notable number of complaints against the cooperative.”

Oriental Cooperative , one of the largest in the country, has not been able to repay its depositors due to a three-month old liquidity crisis. As a result, its more than 7,000 depositors are concerned about the safety of their savings totalling Rs 3.89 billion. The cooperative fell into hard times due to its large investment in the housing business promoted by its chairman Sudhir Basnet. He is now in police custody on fraud charges.

A group of depositors had met NRB governor Yubaraj Khatiwada last week asking him to find a comprehensive solution to all the liabilities of Basnet in a single package. Subsequently, the governor called the stakeholders to a meeting to work on a way out. During the meeting, the stakeholders ranging from banks, apartment buyers, depositors and officials of the Department of Cooperatives (DoC) agreed to seek a comprehensive solution.

According to an NRB official, the central bank has directed the banks concerned to seek the highest recovery possible while auctioning off collateral. A banker who had financed Basnet’s Vagas City Apartment project said that there was no option except to go for a comprehensive solution.

All of Basnet’s ventures ranging from real estate and an airline to the cooperative are in trouble. Most of his housing and apartment projects are incomplete, and banks are not willing to lend more. They have also been pressuring him to repay his loans.

Besides probing Oriental, the committee will also study how to regulate the entire cooperative sector. “It will also initiate an investigation into financial cooperatives as a whole,” said Baskota.

During an inspection conducted by the DoC of 133 savings and credit cooperatives, it had uncovered irregularities like running them as a family business, taking of unauthorized benefits by board directors and key promoters and charging high interest rates on loans.

Source: The Kathmandu Post