May 8: After India introduced a law to pay the loans owed by micro, small and medium industries within 45 days, the industrialists of Nepal have also demanded a strict law in Nepal to collect loans.

The Birgunj Chamber of Commerce Industries wrote a letter to the Industry and Commerce and Labor and Consumer Welfare Committee of the House of Representatives on May 5 stating that loans are not being paid since the onset of the coronavirus pandemic and this has caused unexpected problems in the business cycle.

The Government of India amended the Micro, Small and Medium Industries Development Act and the Income Tax Act last March to introduce a provision for the loans to be paid to micro, small and medium industries for the supply of goods within 15 days with a possibility of extension for a period of 45 days with bilateral agreement.

According to this amended law which came into effect from April 1, if the payment is not made on time, the interest on the outstanding money will also have to be paid based on the bank rate fixed by the Reserve Bank of India. The unpaid money cannot be shown as expenditure for tax purposes in the current fiscal year. Therefore, the chamber wrote a letter to the Parliamentary Committee requesting to bring a strict loan management law like in India.

"Because of the recession in the market due to the coronavirus pandemic and the problem of non-payment of loans, it has become clear that the loan transactions should be regulated by law," Ashok Kumar Temani, president of the Madhes Province chapter of the Federation of Nepalese Chamber of Commerce and Industry, told New Business Age. The private sector has been demanding for this kind of law since a long time. However, the government has not shown much interest in it.

Traders say that due to the decline in the demand in the market, the competition in lending goods has increased. They say that the borrowers have exploited this situation and there is an increasing trend of not paying on time.

Meanwhile, the problem of not getting loans in the face of recession has become a headache for entrepreneurs. The cycle of business has been broken because of the lack of money in the market.

Birgunj Chamber of Commerce Industries, an organization of industrialists and traders of Bara-Parsa, wrote a letter to the finance minister and requested him to adopt an effective policy of loan recovery through the next year's budget.

The senior vice president of the chamber, Hari Gautam, confirmed that he had written a letter to the Industry, Commerce, Labor and Consumer Welfare Committee on May 5 and asked the lawmakers to take initiatives for the debt recovery law.

"The biggest problem of industrialists nowadays has become business on credit. This problem has increased after the onset of coronavirus pandemic. Some businessmen even committed suicide due to the failure to recover loans," said Gautam, adding, "The trend of taking loans but refusing to pay money should be curbed legally.