With the realty sector and the stock market both experiencing a slowdown, the number of loan defaulters has increased in the first 11 months of the fiscal year. According to the Credit Information Bureau (CIB) that keeps records of borrowers blacklisted by banks and financial institutions (BFIs), 211 firms and individuals have been blacklisted as of June 3 compared to 65 during the same period last year. There were 171 names in the dishonour roll in the last fiscal year. With just one and a half months to go before the fiscal year ends, BFIs have been issuing a flurry of 35-day public notices to their borrowers warning of foreclosure in case of default. NIC Bank CEO Sashin Joshi admitted that incidents of loan defaults have increased in recent days. “Realty loans and personal loans that went to the realty sector and for share purchase make up most of the bad loans,” he said. Major business groups that have been blacklisted last year are Unity Life Real Estate Housing of Unity Life International, Momento Apparels, Avco International, Hotel Delux, Mount Everest Brewery, Everest Diamond Mart, General Trading and Engineering and Bakratunda Trading House of the Amatya Group, Snow Land Distillery, Saroj Koirala Memorial Trust, College of Software Engineering, Shivani Air and Cosmic Air, among others. With BFIs witnessing a rise in the level of their non-performing loans (NPL) as a result of defaults, the number of blacklisted firms can go up further. According to Nepal Rastra Bank, the NPL level of commercial banks rose to 3.3 percent as of mid-March this year from 2.48 percent in mid-July 2010. The number of blacklisted defaulters has begun to rise again after a three-year decline. The figure started to jump from the second half of the last fiscal year after a new NRB directive allowed BFIs to include defaulters in the blacklist irrespective of the amount of their outstanding loans. Although this is an alternative provision, loan defaults worth more than Rs 2.5 million should be compulsorily blacklisted. Since fiscal 2006-07, the number of blacklisted firms and individuals had been falling until fiscal 2008-09. BFIs are forbidden from lending to a blacklisted firm or individual, not even the remaining instalments of their loans, says the NRB directive. The government can also seize the passports of blacklisted individuals as per the recommendation of BFIs. According to the NRB directive, banks may also blacklist individuals or firms in the event their cheques bounce or their loans are written off. “These additional provisions have resulted in an increase in the number of blacklisted defaulters in fiscal 2009-10,” states the CIB’s annual report. BFIs are required to blacklist firms or individuals if their cheques bounce three consecutive times. The NRB directive has also provisioned that BFIs should blacklist those using counterfeit cheques, drafts, debit or credit cards and bills. Those not repaying their credit card debts should also be blacklisted. As of fiscal 2009-10, there were 2,152 blacklisted defaulters with outstanding loans amounting to Rs 29.81 billion.
Source:the-kathmandu-post