Number of blacklisted loan defaulters on rises

The number of blacklisted bank loan defaulters has begun to rise again after a three-year declining trend. The number started to rise from the second half of the last fiscal year after a new Nepal Rastra Bank (NRB) directive allowed Banks and Financial Institutions (BFIs) to include defaulters in the blacklist irrespective of loan amount, provided that they meet the basic inclusion criteria. Although this is an alternative provision, defaults of loans worth more than Rs 2.5 million should be compulsorily blacklisted.

How the number of blacklisted firms and individuals is peaking is evident from the fact that a total of 156 names were blacklisted as of Jan. 26 of the current fiscal year compared to 171 in the entire last fiscal year, according to the Credit Information Bureau (CIB) which keeps records of those blacklisted by BFIs. Since fiscal year 2006-07, the number of blacklisted firms and individuals had been falling until fiscal year 2008-09. "After the new NRB provision, the number of blacklisted firms and individuals started to go up," said Anil Chandra Adhikari, chief executive officer of CIB.

Among the major firms blacklisted over the last six months are Cosmic Air, Avco International, Memento Apparels, Mount Everest Brewery and Triveni Cement. No BFI can lend to a blacklisted firm or an individual. Not even the remaining installments of loan, says the NRB directive. The government can also cancel passports of blacklisted individuals as per the recommendation of BFIs. According to the NRB directive, banks may blacklist individuals or firms in the event of cheque bouncing and write-offs. "These kinds of additional provisions have resulted in increase in the number of blacklisted defaulters in FY 2009-10," states CIB's annual report.

BFIs should blacklist any firms or individuals if their cheques bounced for three consecutive times. The NRB directive has also provisioned that BFIs should blacklist those involved in fraud¿use of counterfeit cheques, drafts, debit and credit cards and bills. Those not repaying credit card debts should also be blacklisted. However Adhikari of CIB said the NRB provision that BFIs could blacklist defaulters of loans worth below Rs 2.5 million only after blacklisting defaulters of loans worth more than the amount has created confusion. As of FY 2009-10, there were a total of 2,152 blacklisted defaulters with total outstanding amount of Rs 29.81 billion.

Sudhir Khatri, chief executive officer of DCBL Bank, said it was natural to see rise in the number of blacklisted defaulters given the increased number of BFIs. "Current political and economic situation of the country also resulted in increased loan defaults," he added. During the first quarter of the current fiscal year non-performing loans of commercial banks went up by Rs 2.93 billion. The NPL level rose by 0.61 percent to 3.15 percent. "The default rate will further go up with stagnation in the real estate sector, and industrial sector facing acute power outrage and higher interest rate," said Khatri. Bankers say that that there has not been 100 percent payment of interest too in recent days. Not only the number of blacklisted defaulters, number of new borrowers also increased by more than 25% in FY 2009-10 compared to the previous year, as per the record of CIB.

Source:
ekantipur