In fiscal year 2012-13, CIB blacklisted 660 firms and individuals on the recommendation of financial institutions for failing to repay loans. Number of blacklisted borrowers more than doubled in the last fiscal year in comparison to fiscal year 2011-12, when CIB blacklisted 305 defaulters.
In November 2012, the central bank had directed financial institutions to blacklist borrowers who defaulted loans worth Rs one million or more. According to the earlier regulation the floor was fixed at Rs 2.5 million.
With the downsizing of the limit, more individuals and firms have been blacklisted. Moreover, the total number of blacklisted borrowers last fiscal year stood at 704, but 44 names on the list were able to clear their debts and remove their names within a year.
“Nepal Rastra Bank (NRB) does not ask banks to blacklist any particular individual or firm. It depends on the particular financial institution whether it wants to recommend blacklisting to CIB or not,” said spokesperson for NRB Bhaskar Mani Gyanwali. “However, bringing down the limit on defaults to Rs one million has definitely helped financial institutions take a strict stance against defaulters — be it small or large.”
There are more individual names in the blacklist than institutions — almost two-thirds are individuals.
Being blacklisted makes the borrower — any person or firm — ineligible for acquiring or rescheduling any new loan from any financial institution; not even a credit card. Such blacklisted people cannot even become a guarantor for other loans. Moreover, they also become ineligible to hold the post of a director in any publicly listed company.
Since the past two years, names on the blacklist have been growing, thanks to the downturn in real estate and housing sectors being experienced since early 2010. Number of housing and realty companies on the list stand at 32 among 660. Housing companies such as Kohinoor Hill Housing, Ayusha Developers and Oriental Builders have been recommended by more than one financial institution for defaulting.
“Most individuals on the blacklist are those who obtained loans for buying land around the time the realty market was going bust so they could not find a buyer to even cover their buying price,” said a banker, pointing out, “Blacklisting is kind of the easiest measure to make defaulters pay back so banks are resorting to recommending more names for speedy recovery.” Mostly, small defaulters are fearful of getting blacklisted, he added.
This year, there are big names on the blacklist such as promoters of NB Group — Jit Bahadur Shrestha — NB Group’s chairman, Laxmi Bahadur Shrestha — managing director, Jen Shrestha, Anar Devi Shrestha and Purna Bahadur Shrestha, former president of FNCCI Chandi Raj Dhakal, and entrepreneur Sudhir Basnyat who in trouble due to excessive investment in housing projects.
src THT
