Government Moves Forward With Plan to Refund Deposits of Cooperative Victims; Draft Procedure Sent to Finance Ministry

The Ministry of Land Management, Cooperatives, and Poverty Alleviation has forwarded the draft procedure for refunding deposits of cooperative victims to the Ministry of Finance for review. The government is preparing to refund savings of up to Rs. 100,000 to depositors who lost their money in troubled cooperatives, ensuring state-backed protection for small savers.

According to Damodar Wagle, joint spokesperson of the ministry, once the Finance Ministry provides its feedback, the proposal will be sent to the Ministry of Law for legal opinion. After approval from the Law Ministry, the proposal will be forwarded to the Cabinet for final endorsement. Once the Cabinet approves it, refund distribution will begin under a newly created Revolving Fund dedicated to compensating affected depositors.

Wagle stated that the government aims to provide immediate relief to depositors with small trapped amounts in the first phase. The Finance Ministry will contribute seed capital to the Revolving Fund, and payments will be made to victims of cooperatives that have been officially declared problematic. Additionally, funds recovered from the auction of such cooperatives’ assets will be deposited back into the same Revolving Fund to sustain future payouts.

Cooperative victims have long been organizing protests and forming committees nationwide, demanding refund of their savings and legal action against fraudulent cooperative operators. Nepal currently has around 34,000 cooperatives, registered under three different tiers of government, resulting in regulatory fragmentation and weak oversight.

Experts point out that while cooperatives operating according to cooperative principles and community benefit models have performed well, many institutions that collected deposits and issued loans irresponsibly have fallen into crisis. The government believes the new refund procedure will help restore public confidence and provide timely support to thousands of affected depositors.