In the dynamic world of finance, where loans and credit play a crucial role, Nepal’s banking sector has grappled with the issue of defaulters and blacklisting. As the number of individuals, firms, and companies failing to repay their loans continues to rise, the consequences of being blacklisted have become a harsh reality.
The credit information center, an institution affiliated with 137 banks and financial institutions in Nepal, has recorded a staggering 2,475 blacklisted entities from the year 2046 BS to Chaitra 2080 BS. Bankers attribute this alarming trend to various factors, including the exploitation of political instability, influence peddling, and the acquisition of loans beyond the borrowers’ actual capacities.
Furthermore, the global financial crisis and economic challenges in Nepal have exacerbated the problem, leaving the business community struggling to generate sufficient returns to meet their loan repayment obligations. However, the consequences of being blacklisted extend far beyond financial implications.
Nepal Rastra Bank, the central bank of Nepal, has issued a consolidated directive (No. 12/080) that outlines the procedures for loan notification and blacklisting. This directive, issued under the authority granted by the Nepal Rastra Bank Act, 2058, and the Nepal Rastra Bank Credit Information Regulations, 2059, aims to establish a robust system for credit information exchange.
Under this directive, licensed institutions are required to update loan-related details in the credit information center’s online system within 15 days of the monthly payment. Exceptions are made for specific loan types, such as gold and silver loans, term deposits, government-guaranteed loans, credit card loans up to Rs. 300,000, and loans up to Rs. 500,000 approved through electronic means.
Before opening any account, licensed institutions must ensure that the depositor is not on the blacklist by consulting the credit information center’s details. Notably, institutions are prohibited from charging customers any fees for this service.
The directive empowers licensed institutions to recommend blacklisting borrowers who fail to repay loans, mortgages, or facilities exceeding ten lakh rupees. Upon receiving such recommendations, the credit information center promptly adds the borrowers to the blacklist within five days, after verifying their identities.
The consequences of being blacklisted are far-reaching and severe. Blacklisted individuals, firms, companies, and organizations face a 100% loan loss provision for any outstanding loans. Additionally, they are barred from withdrawing money from their accounts, conducting banking transactions, or using ATM cards. Furthermore, they are prohibited from opening new accounts or obtaining loans from other banks or financial institutions, and may even face restrictions on accessing government services.
The ripple effects of blacklisting can extend to three generations, potentially depriving children and grandchildren of educational opportunities and even hindering international travel plans. Moreover, the social stigma and damage to reputation can be profound, leading to humiliation and exclusion from society.
As the number of defaulters and blacklisted entities continues to rise, Nepal Rastra Bank and financial institutions are urging borrowers to prioritize timely loan repayments and comply with banking laws and regulations. Failure to do so not only jeopardizes their financial standing but also their social standing and future prospects.
In conclusion, the blacklisting process in Nepal serves as a stern reminder of the importance of responsible borrowing and repayment. By understanding the consequences and adhering to loan agreements, individuals, firms, and companies can avoid the harsh reality of being blacklisted and maintain a positive financial and social reputation.
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