Financial institutions do not keep proper records: DRT

KATHMANDU,DEC 23: 

The cases of fake collaterals, insufficient documentation and absconding defaulters made debt recovery a difficult task for Debt Recovery Tribunal.

“The banks and financial institutions have lent without proper records of the borrowers and guarantors,” said chairman of the tribunal Gokul Prasad Burlakoti, during the release of its annual report for the fiscal year 2010-11.

“Majority of the cases that reach us also lacks proper documentation,” he said, adding that the loans have also been floated with overvaluation of the collaterals making it auction and recover credits difficult.

He also highlighted involvement of the financial institutions’ promoters, directors and officials in lending to their relatives that has created problems in recovery due to undervaluation and in few cases with fake collaterals.

The tribunal has, so far, delivered verdict in 2,214 cases among 2,597 cases filed in the tribunal against the defaulters. It has recovered claims worth Rs 30.3 billion since its inception eight years ago. In the fiscal year 2010-11, the tribunal saw only 58 cases being filed against the defaulters and delivered verdict on 263 cases.

The financial institutions are apprehensive about approaching the tribunal to recover bad loans due to fear of exposure of their knowing involvement in lending to fake projects, lamented Burlakoti.

“The borrowers should know that pledging fake collaterals and providing fake details to obtain loan is a financial crime and will be punished severely,” governor of the central bank Dr Yubaraj Khatiwada pointed out.

He assured that central bank will direct the financial institutions to approach tribunal to recover bad loans if the need arises. 

“However, in some cases to obtain handsome collaterals even financial institutions act as village money lenders delaying the recovery and auction,” Khatiwada added.

“Furnishing fake details and collaterals to obtain loans and later running away from payback is just another instance of growing impunity and lawlessness in the society,” said finance secratary Krishna Hari Baskota.

He assured that the authorities are strong enough to penalise citing the example of actions taken and to be taken against those involved in the fake VAT bill and IC misappropriation.

Source: THT