PAC directs banks to recover loans

The Parliamentary Public Account Committee (PAC) on Sunday have directed all banks to formulate a plan of action within three weeks for recovering bad loans, which have crossed Rs 35 billion.

The PAC Sunday held a discussion on the hurdles in recovering all non-performing loans with the Governor of Nepal Rastra Bank, Bijaya Nath Bhattarai, Finance Secretary, Vidhyadhar Mallik, Auditor General, Gehendra Nath Adhikari, and representatives of the Nepal Rastra Bank (NRB) and Rastriya Banijya Bank (RBB) and gave the direction

“Such a plan of action will comprise, among other things, strategies to be adopted by banks and the value of collateral,” said the PAC chairman, Chitra Bahadur KC.

Representatives of the banks told MPs that the court’s “stay orders” were the major problem the banks were facing in their bid to recover bad loans. The bank employees are “being threatened” by loan defaulters, particularly in Nepalgunj and Birgunj, they said.

“Stay orders are blocking the recovery of Rs 4.45 billion in principal and interests,” said a foreigner working at the NRB. He added that 50 per cent of total bad loans, which are owed by top 20 bank defaulters, are difficult to recover. Rest of the bad loans can be recovered.

He said that freezing of passports of top bank defaulters would help recover bad loans. “The NRB is in the process of taking that measure”. The RBB has already formed the Loan Recovery and Restructure Department. It has begun working on the basis of an action plan to recover bad loans.

“RBB’s current bad loan is Rs 12 billion. We have recovered Rs 570 million in the last four months and our target is to recover Rs 2.6 billions within a year,” said an officer from the RBB. He said that the bank has told loan recovery officers at the local level to recover bad loans amounting to over Rs 25,00,000. Officers at the centre have been told to recover bad loans amounting to over Rs 10 million.

The MPs asked the bank representatives if they have taken any action against those officers who had taken wrong decisions while issuing loans in the past.

The NRB has already taken action against 200 such employees, the representatives told the MPs.