The Ministry of Cooperatives and Poverty Alleviation is preparing to table a proposal to form a committee to take over the troubled Oriental Cooperative and compensate its depositors.

The ministry has formulated a terms of reference (ToR) for formation of the committee. It has been approved by the Ministry of Law, Justice and Parliamentary Affairs. “We will forward the ToR to the Cabinet very soon,” said Cooperatives Secretary Gopi Nath Mainali.

It has been more than two months since the ministry formally declared Oriental Cooperative “problematic” and decided to form a committee, which will take over the institution, evaluate the entity’s assets, address problems of victims who lost money, and settle other liabilities. The committee will also look into the health of around 130 cooperatives that have been categorised as troubled.

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 the delay in formation of the committee has dashed hopes of the people, who are waiting for the government to come to their rescue.

“We know the process is moving ahead slowly. We are trying to expedite it,” 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.