RBB, NBL make carrot-and-stick offer to loan defaulters

KATHMANDU, June 5:

Rastriya Banijya Bank (RBB) and Nepal Bank Limited (NBL) have started a recovery drive for loans defaulted before 2002 when the Financial Reform Programme was implemented at these two banks.

Due to large-scale non-payment of loans, these two old banks nearly went belly up. Nepal Rastra Bank (NRB) had to step in and take over their management and implement reform measures. The government took loans worth Rs 7 billion from the World Bank to implement the reform programme.

RBB has started a special drive to recover loans worth more than Rs 10 million while NBL has offered a special discount on loans valued at up to Rs 2.5 million. The two banks have set the end of this fiscal year as the deadline to repay the loans.
 
Bank officials said that they had to launch a recovery drive as the outstanding loans added up to a very large sum even though they had been written off in the balance sheet. As per the central bank’s directive, banks have to write off loans that are more than five years old, however, they have to recover them.

According to RBB and NBL officials, the principal amounts of their outstanding loans amount to Rs 6.75 billion and Rs 2 billion respectively and they were defaulted before 2002. RBB said it has to collect interest worth Rs 32 billion.

The failure of RBB and NBL to recover old loans has invited a sarcastic comment from NRB governor Yubaraj Khatiwada. Speaking at an interaction held at the Finance Ministry on Sunday, he said that the two banks seemed to have swelled up due to illness while looking at their balance sheets in which the old defaulted loans had been written off.

Meanwhile, in a bid to speed up the recovery process, RBB has formed a committee headed by a board director to communicate with the debtors owing more than Rs 10 million. The committee will also suggest measures to recover the money. Two board directors, deputy general managers and legal experts are on the committee, according to the bank.

According to RBB, defaulted loans worth more than Rs 10 million add up to Rs 4 billion. The number of defaulters of such loans is 60. RBB CEO Krishna Prasad Sharma said that the committee was expected make its recommendations in two to three weeks, and the bank would launch its recovery drive based on its advice.

Among the bank’s large debtors are the Mangaturam Group, Amatya Group, Momento Apparel, Kirant Group, Bashuling Sugar Mill, Bhrikuti Pulp and Paper Factory, Anupam Foods and Samyam Vegetables.

Meanwhile, NBL has offered a discount on the interest owed according to the amount of the defaulted loan. Debtors are required to pay only 40 percent of the outstanding interest if the defaulted loan is worth less than Rs 100,000. In case of loans worth from Rs 2 to Rs 2.5 million, the bank has asked that debtors only pay the principal amount and an equal amount as interest.

NBL general manager Kiran Kumar Shrestha said that the recovery drive had been initiated to recover as much of the old loans as possible before the fiscal year ends to help strengthen the bank’s financial situation. Major loan defaulters of NBL are the Sahani Group, Lohani Group, Bashuling Sugar Mill (which has borrowed money from a consortium led by the Agricultural Development Bank) and Amatya Group.

Source: Kathmandu Post