Central bank tells BFIs to first auction the collateral before blacklisting loans defaulters

Published On: November 30, 2023 09:30 AM NPT By: Republica  | @RepublicaNepal

KATHMANDU, Nov 30: Nepal Rastra Bank (NRB) has turned lenient on loan defaulters, asking the banks and financial institutions (BFIs) to assess the collateral valuation before blacklisting the concerned debtors.

Issuing a unified directive on Wednesday, the central bank has asked the BFIs to first take into auction the property of the borrowers that had been considered for the collateral, before blacklisting the defaulters. 

“If the revenue generated from auction sale of the securities fall short of the borrowed amount, then the BFIs will have to extend the deadline of 90 days to the debtor to clear the remaining dues,” reads the directive. As of now, BFIs have been blacklisting the borrowers in bad debts after issuing a 35-day legal notice.

The authorities freeze bank accounts of the blacklisted individuals and firms, while they are barred from opening bank accounts and are restricted from carrying out other financial transactions via banks. The directive talks about allowing such individuals and firms to use the banking means to receive pension and social security allowances.

If the blacklisted firms are joint-venture businesses, they can hold banking transactions even with their partner companies. Till date, any company having stakes of more than 15 percent in a joint venture are blacklisted along with its partner firms that default the bank loans. In the new provision, the partner companies will not have to face this action just because of their loan defaulting partners.    

Recently, the BFIs are found to be blacklisting a large number of borrowers who fail to clear their dues on time. According to the Credit Information Bureau (CIB), a total of 73,371 defaulters were blacklisted by the BFIs as of mid-November this year.

In the past four months, 14,775 new entries were added to the list. The CIB records show that the blacklisted number is in a massive rise mainly in the past five years.  


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