It’s been exactly a month since the Ministry of Cooperatives and Poverty Alleviation formally declared Oriental Cooperative “problematic” and decided to form a committee to take over the troubled institution and compensate depositors.

The move made by the ministry had raised hopes among hundreds of depositors for recovery of billions of rupees that they had lost following the cooperative’s meltdown. But till date the Ministry of Cooperatives has not been able to form the committee, which was supposed to take over the institution, evaluate the entity’s assets, address problems of victims who lost money, and settle other liabilities.

“Things are moving quite slowly because we haven’t been able to get the approval from the Ministry of Finance,” Cooperatives Secretary Gopi Nath Mainali said.

Initially, the Finance Ministry had expressed reluctance to allow the Cooperatives Ministry to set up the committee citing it was not cost efficient to set up a body just to settle liabilities of one institution, according to Mainali. The Cooperatives Ministry later explained that the committee would not only look into the case of Oriental Cooperative but other troubled entities. Currently, around 130 cooperatives have been categorised as troubled. The Cooperatives Ministry will soon start the process of formally declaring a number of them as “problematic”.

“Following this explanation, the Finance Ministry has agreed to extend budget to set up the committee,” Mainali said. “But the problem now is that Finance Minister [Gyanendra Bahadur Karki] is busy with the upcoming [federal parliamentary and state assembly] elections. So, our proposal is yet to be approved.”

Once the request to form the committee is endorsed, the Cooperatives Ministry will have to get the approval of the Ministry of Law, Justice and Parliamentary Affairs. Following this, the committee can be formally established. “We need to set up the body immediately because hundreds of people, who lost billions of rupees, are still waiting for the government to come to their rescue,” said Mainali.

Oriental Cooperative went bankrupt in 2013 after it disbursed loans haphazardly and allowed its key promoter, Sudhir Basnet, to illegally invest depositors’ funds in the real-estate market, which later crashed. These unsound practices and financial irregularities inflicted losses of around Rs5.2 billion, including Rs3.9 billion in principal, on depositors.

At that time when Oriental Cooperative went bust, it was also selling apartments and housing units via Oriental Builders and Developers, which was owned by promoters of Oriental Cooperative.

Oriental Builders and Developers was involved in development of over half a dozen housing and apartment projects in the Kathmandu Valley, including Oriental Colony, Chakrapath Heights at Basundhara, Dhumbarahi Apartments Phase 2, Bagmati Apartment at Sankhamul, Eastern Apartment at Kausaltar, Vegas City at Balkumari, Imperial Apartment at Naxal and Sanepa Height Apartment, among others.

Many people who had bought apartments from Oriental Builders and Developers and companies affiliated to it had complained that the firm had collected advance payment from them but failed to deliver the assets. Around the time Oriental Cooperatives went bankrupt, at least 155 other financial cooperatives had also gone bust largely because of unsound lending practices, exposure to the real-estate market and involvement of promoters in embezzlement, wiping off over Rs3 billion parked in depositors’ accounts.

One of the major reasons for failure of so many institutions at that time was lack of proper regulatory oversight. For instance, Oriental Cooperative had opened nine branch offices in the Kathmandu Valley, Pokhara, Biratnagar, Itahari, Syangja and Parsa, although legal provisions barred it from doing so. Also, promoter of one cooperative was found operating a slew of other such entities, which was illegal.