Prabhu Group accused of embezzling Rs 6 billion from 4,000 cooperatives

KATHMANDU, MARCH 29: Devi Prakash Bhattachan, the founder chairman of Prabhu Group and a Member of Parliament (MP) from the UML party, has been accused of misusing billions of rupees from cooperative institutions. It has been revealed that through Prabhu Management Company,  the funds from around 4,000 savings and credit cooperatives, including remittance payments and security deposits, were misappropriated.

Kusum Lama, chairperson of Prabhu Management, claims that Bhattachan and Prabhu Money Transfer misused remittance payments and security deposit funds belonging to these cooperatives. She has already filed complaints against Bhattachan with Nepal Rastra Bank and the Kathmandu Metropolitan Police. According to her, no action has been taken against him so far due to his political influence.

In response, Bhattachan denies all allegations, stating that Lama has falsely accused him. He claims to have left Prabhu Management in 2071 BS and asserts that he has no responsibility for the company’s activities. "Lama has been spreading false rumors against me, so I have filed a defamation case in court," he defends.

Rs 6 billion in remittance and deposits missing from nearly 4,000 cooperatives

Prabhu Management Company has failed to pay Rs 6 billion in remittance payments and security deposits from around 4,000 cooperatives. As the company ceased its remittance services without settling payments, these cooperatives have been approaching various authorities seeking reimbursement.

Till 2077 BS, the company had collected Rs 1 billion in security deposits from cooperatives, a cooperative manager told aarthiknews.com. The manager stated that Prabhu Management had withheld Rs 6 billion, including remittance payments and deposits.

Prabhu Management Company serves as the super-agent for Prabhu Money Transfer, appointing around 4,000 cooperatives as sub-agents across Nepal. According to Chandra Prasad Dhakal, president of the Nepal Federation of Savings and Credit Cooperative Unions (NEFSCUN), the company collected security deposits ranging from Rs 100,000 to Rs 500,000 per cooperative in exchange for sub-agent appointments. Furthermore, the company has not settled remittance payments that cooperatives had already disbursed to customers.

Complaints regarding the non-payment of remittance funds have been lodged at NEFSCUN for the past two years. "The company is not only denying the return of security deposits but is also withholding remittance payments. As a result, the demands of cooperatives to legally penalise it have been growing," Dhakal said.

Apart from NEFSCUN, affected cooperatives are seeking justice from Nepal Rastra Bank, the Ministry of Land Management, Cooperatives, and Poverty Alleviation, and the Central Investigation Bureau (CIB).

Notably, there is a lack of accurate data on how many cooperatives are affected or how much money remains unpaid.

Cooperatives reporting fraudulent activities

According to Krishna Nepal, president of the Lumbini Province Savings and Credit Cooperative Union, Prabhu Group has defrauded many cooperatives in the eastern and far-western regions. Several cooperatives in Lumbini Province have also filed complaints. The union has begun collecting data on the affected cooperatives from its offices in Butwal, Dang, and Ghorahi. So far, eight cooperatives have reported losses totalling Rs 12 million to Prabhu Group, with one cooperative alone missing Rs 4.2 million in remittance payments.

Similarly, in Morang District, 25 savings and credit cooperatives have reported being defrauded of Rs 22.8 million in deposits and remittance payments by Prabhu Management, according to Prem Prakash Koirala, president of the Morang District Cooperative Union. As complaints increase, the union has started gathering data from all affected cooperatives. The deposits collected per cooperative range from Rs 133,000 to Rs 300,000, with some cooperatives awaiting remittance payments of up to Rs 4.5 million.

Prabhu Group accused of systematic fraud through its companies

Prabhu Group launched its money transfer service in 2058 BS by appointing cooperatives across Nepal as sub-agents. To streamline dealings with cooperatives, it established Prabhu Management Company on Mangsir 15, 2069 BS (December 15, 2012).

Initially, Devi Prakash Bhattachan owned 50% of Prabhu Management’s shares, while his son-in-law Binod Thakali held 20%, Kusum Lama 20%, and Dakshya Poudel 10%. Later, Bhattachan acquired 5% of Thakali’s shares, while Lama took 15%, increasing their stakes to 55% and 35%, respectively.

Dakshya Poudel, then chairman of the Cooperative Board, played a key role in linking cooperatives to Prabhu Management. Sources claim he designed the structure integrating cooperatives into the company’s system.

The company required cooperatives to deposit Rs 100,000 to Rs 300,000 as security and charged an Rs 5 commission per transaction. Till Jestha of 2081 BS, Prabhu Management had appointed 7,000 cooperatives as sub-agents, collecting deposits from 4,569 of them. Over 3,000 cooperatives have yet to recover a total of Rs 973.7 million in security deposits.

According to Bhattachan, he left Prabhu Management in 2071 BS. By then, 1,687 cooperatives were already associated with the company, with Rs 409.7 million in unpaid deposits. By 2077 BS, the number of cooperatives had risen to 3,709, with Rs 912.2 million still unreimbursed. Bhattachan’s daughter, Siksha Bhattachan, also held shares in the company until 2077 BS.

Bhattachan exits Prabhu Management and launches Prabhu Payment

After allegedly misappropriating billions from cooperatives, Devi Prakash Bhattachan formally exited Prabhu Management. Initially, he transferred his shares to his nephew, Mizaj Bhattachan, before reassigning them to his daughter, Siksha Bhattachan, and his close associate, Dhubrachandra Dhital, on Jestha 11 in 2074 BS. By 2077 BS, he had transferred the remaining shares to company employees, legally distancing himself from Prabhu Management.

Following his departure, Bhattachan and his associates established a new company, Prabhu Payment, with a similar operational model. Mizaj Bhattachan, Durgadatta Joshi, and Dhubrachandra Dhital are key investors in this new enterprise.

Cooperatives seek government intervention; regulators remain passive

As Prabhu Management fails to settle security deposits and remittance payments, affected cooperatives have begun seeking government intervention and filing complaints with various regulatory bodies. However, the concerned authorities have largely remained unresponsive.

Chhet Prasad Upreti, acting executive director of Nepal Rastra Bank’s Non-Banking Financial Institution Supervision Department, states that Prabhu Management does not fall under the central bank’s jurisdiction, preventing them from taking action. "We received complaints about non-payment and conducted an inspection, which showed that Prabhu Money Transfer had transferred remittance funds to Prabhu Management. However, without an audit report, we cannot make any definitive claims," he explains.

NEFSCUN President Dhakal also clarified that the federation is not responsible for cooperative remittance transactions, as cooperatives entered into agreements independently. "We only facilitate operations. We have forwarded complaints to the relevant authorities," he said.

Similarly, Raghunath Mahat, Deputy Registrar at the Department of Cooperatives, states that they had no prior knowledge of the issue.