April 9: The number of cases at the Debt Recovery Tribunal formed to recover bad loans of banks and financial institutions has more than doubled this year.

With banks encountering difficulties in loan recovery amidst a decline in economic activities, the number of cases filed with the tribunal has also begun to rise.

Banks can register a case at the tribunal if they are unable to recover the loan even from the mortgage auction. Information officer of the tribunal, Devendra Dhakal, said that the number of cases has increased as there is no condition to recover the loan from the mortgage due to the fall in real estate prices along with the economic recession.

As of mid-March of the current fiscal year (FY), banks and financial institutions have registered 342 cases at the tribunal. During the corresponding period last year, only 162 cases were registered. It shows that the number of cases has doubled this year. A total of 200 cases were registered at the tribunal last year.

With the increase in bad loans, banks and financial institutions are currently focused on debt recovery. However, the number of cases in the tribunal is increasing due to the non-recovery of loan from the mortgage. According to the tribunal, the highest number of cases in a single month in the current year was registered in the Nepali month of Magh (mid-January to mid-February) with a total of 66 cases registered in the review month. The tribunal said that 49 cases were filed in mid-February to mid-March.

According to the financial statements banks of the second quarter of the current fiscal year, the average bad loan ratio of banks and financial institutions has reached 3.73 percent. Data of Nepal Rastra Bank shows that the bad loans of commercial banks stand at 3.63 percent while that of development banks and finance companies are 3.61 percent and 9.61 percent respectively.

The International Monetary Fund has approved loans for Nepal on the condition that the credit status of 10 big banks will be audited by an international organization. Nepal Rastra Bank has also invited tenders for the auditing by international organisations.

Although the number of cases in the tribunal is increasing, the situation of debt recovery is weak. By mid-March, the number of cases in the tribunal reached 676, including 334 backlog cases of last year. As of mid-March, the tribunal has settled only 251 cases. There are still 425 cases to be decided.

So far, the tribunal has recovered Rs 34.91 billion of bad debts of banks. As of mid-March of the current fiscal year, the debt recovery stands at Rs 644.4 million.

The tribunal was established in 2060 BS in accordance with the Bank and Financial Institutions Debt Recovery Act 2058 to facilitate debt recovery. Banks and financial institutions can register a case at the tribunal if the principal amount is over 500,000. There is a provision to file a case within four years if the loan cannot be recovered despite the banks' efforts.