CIB, which acts as the repository of credit information of consumer and commercial borrowers of all bank and financial institutions (BFIs), has listed a total of 4,888 consumer and commercial borrowers who have defaulted on their loans. It collects and collates credit information from BFIs and disseminates them on request.In the corresponding period of last fiscal year, CIB had blacklisted 666 borrowers.
CIB's blacklist includes borrowers from as early as 1990.
Nepal Rastra Bank (NRB) regulation has made it mandatory for all BFIs to send credit records of all clients borrowing Rs 2.5million or more to CIB. They are also required to seek credit information of potential borrower from CIB before they extend, renew, restructure or reschedule loans above Rs 1 million.
BFIs will have to face punitive actions by the central bank if they fail to take credit information from CIB before disbursing new loans.
"Credit information reports from CIB help lenders to make better judgments on their lending decisions. This will help to make lending decision process fast, easy and objective," an official at CIB, said. "Good borrowers will be benefited in terms of getting better terms and conditions (such as lower interest rate), faster service and other additional incentives from the lending institutions."
According to CIB, borrowers, who have outstanding loans equal to or in excess of Rs 2.5 million and whose principle and interest are overdue by a year, are blacklisted. Bankruptcy or disappearance, misuse of credit facilities, and inadequate or inappropriate security by borrowers also lead to blacklisting.
CIB includes the name of borrowers in the blacklist only after it gets written recommendation from BFIs. However, name of borrowers is removed from the backlist if his/her loan account is settled, credit facility is restructured, or if his/her loan liability is accepted by other person acceptable to the concerned BFIs.
With borrowers' repayment capacity eroded by the recent devastating earthquake, Tarai turmoil and subsequent economic blockade imposed by India, banking experts fear that the number of such blacklisted borrowers will increase significantly in the coming months. "The blacklist includes only the borrowers whose principal and interest is overdue by a year. It has not been a year and the central bank has issued some relaxation and extended the deadline to service debt," a CEO of a leading commercial bank said. "But number of such borrowers will rise as businesses have been affected by recent problems," he added.
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