Blacklisting Of Banking Defaulters

The trend of taking loans from banks and financial institutions but not being able to pay due to circumstances or wanting to do so under the guise of power has affected the banking sector. If the bank fails to pay off the loan despite many attempts or acts against banking laws and regulations, such a person, firm, or company will be blacklisted in the credit information centre as recommended by the bank, which is called the blacklist. At present, the number of defaulters and blacklists is increasing. About 137 banks and financial institutions are affiliated with the credit information center. According to the credit information centre, 2,475 were blacklisted from 2046 BS to Chaitra 2080 BS. Bankers are saying that the problems in loan repayment are also due to taking advantage of the country's political instability, access, and influence and taking more loans than their physical assets and project capacity, whether or not influencing the employees. However, the financial crisis in the world and even in Nepal is still the same, so the business community still complains that there is a problem in the payment of bank loans because the business is not giving returns. Regarding the blacklist, Nepal Rastra Bank has issued a consolidated directive no. Arrangements have been made regarding loan notification and blacklisting in 12/080.

For Section 88 of the Nepal Rastra Bank Act, 2058, this instruction has been issued using the authority given by Section 79 of the same 

Act and Regulation 7 of the Nepal Rastra Bank Credit Information Regulations, 2059. According to this, a credit information centre has also been established for the exchange of credit information.

It is mentioned that the licenced organisation shall update the loan-related details in the prescribed format in the centre's online system within 15 days of the monthly payment. However, this arrangement is not mandatory for gold and silver, term receipts and government guarantee letter mortgage loans, credit card loans up to Rs. 300,000, and loans up to Rs. 500,000, which are approved through electronic means.

Before opening any account, the licenced institution should only open the account after making sure that the depositor is not on the blacklist according to the details of the Credit Information Center. For this, the organisation is not allowed to charge any fee from the customer. The licensed institution shall recommend that the loan amount of ten lakh rupees or more be blacklisted under the provisions related to blacklisting. According to this arrangement, it has been arranged that the related licenced institution can recommend to the credit information centre to blacklist the borrowers who do not pay any amount of loans, mortgages, or facilities from licenced institutions, banks, or financial institutions. In this way, after receiving the recommendation from the concerned bank to be included in the blacklist, the credit information centre will check the name (an official document that reveals the identity taken when opening the account) and put it on the blacklist within five days. It has been arranged that the borrowers who do not pay the loan on purpose or due to circumstances can also be blacklisted if they do not complete the banking process or if they do not repay the loan.

If a licensed organisation wants to provide loans to family members related to blacklisted persons, it can provide loans according to the decision made by the board of directors. In the case of loans granted in this way, double the amount of loan loss should be provided. But it has been mentioned that in the case of all loans, no more than a 100 per cent loan loss arrangement should be maintained. If the amount assessed by a mortgage appraiser is less than two-thirds of the amount assessed by a licenced institution at the time of the mortgage auction, or if the mortgage of the wrong place or nature is assessed as correct, such a mortgage appraiser shall be included in the black list by the centre on the recommendation of the licenced institution.

It is also provided that if a licensed organisation raises less than two-thirds of the appraised value of that collateral during a mortgage auction, if the board of directors of the relevant licensed organisation feels that the appraiser is not at fault due to circumstances beyond the control of such appraiser, it can also decide not to blacklist such appraiser.

The mortgage on the loan is evaluated. If the debtor of that loan is removed from the blacklist, the appraiser who evaluates such a mortgage will also be removed from the blacklist by the concerned bank or financial institution. Other conditions included in the blacklist (a) include defrauding funds using fake checks, drafts, foreign currency, credit or debit cards, bills, etc., documents, and instruments. In the same way, if a person, firm, company, or organisation is found guilty of attempting to commit fraud, if it is proven that a person, firm, company, or organisation is involved in a crime related to financial transactions, and if a person, firm, company, or organisation does not repay the loan taken from the licenced institution within the terms of the loan document, the bank and In the case of collection proceedings in accordance with Section 57 of the Financial Institutions Act 2073, in the case where the licenced institution has to write off the loan, if the balance in the account is insufficient, if a person, firm, company, or organised organisation issues a check of any amount without sufficient balance in its account, or if the person who receives the check If the check is returned for any reason other than when it is possible to confirm that the details mentioned in the check are correct, banks and financial institutions have been subject to cash fines for not following the instructions given by this bank in accordance with the Nepal Rastra Bank Act, 2058, the Bank and Financial Institutions Act, 2073, and other policy provisions. Until cash fines are paid by the director, executive head, and other employees of the organisation, the account holder stops payment of the check on reasonable grounds such as loss, theft, or unauthorised use of the check, even if such check is stopped even after the check has been issued. In cases of non-payment, the person, firm, company, or organisation that issued the check should be blacklisted; this has been mentioned in the consolidated instructions issued by Nepal Rashtra Bank to banks and financial institutions.

What happens when blacklisted?

A 100 per cent loan loss provision should be established for loans provided to blacklisted individuals, firms, companies, or organised organizations. If there is any debt to be recovered from blacklisted individuals, firms, companies, and organised organisations, a 100 per cent loan loss should be arranged for such loans, and if such arrangement is not found, according to clause (c) of sub-section (2) of section 100 of the Nepal Rashtra Bank Act, 2058, a cash fine of up to five lakh rupees will be imposed on the concerned executive head.

If the debtor is blacklisted, the debtor's name will be registered on the blacklist, and the firm, company, or organisation on the blacklist will not be able to withdraw money from his account until he is removed from such a list.

No other type of banking transaction is allowed. ATM cards will not work. It is not possible to open an account and take a loan at other banks or financial institutions. Government services may be closed. 

Three generations can be affected. For example, they should be deprived of the facility of bank loans for the education of their sons and daughters. You may be prevented from going abroad. But if the debt or liability to be paid is paid, it is arranged to be released from the blacklist easily.

If any organisation or person is blacklisted, it will be deprived of the facilities provided by the government and the banking system, as mentioned above. In addition to this, its social reputation will also fall, and in the future, it should not be brought into a situation where it will have to experience humiliation in front of everyone in society. 

None of us should believe it if the institution says that it does not have to pay its debt. Contact the bank as much as possible and solve the loan problem in agreement with the bank. Otherwise, it cannot be said that in the future, if someone misleads them, they will be deprived of the benefits of the state as well as social exclusion. Therefore, since the bank is our true partner and good friend, take a loan from the bank or financial institution and pay the loan on time. This will avoid the blacklist and also increase economic progress and social reputation.

(Dr. Bashistha is an expert in Bank and Financial Sector Reform in Nepal.)