Finance Minister Swarnim Wagle Explains Why Relief Is Being Offered to Blacklisted Individuals
Image Source, RSP
Finance Minister Swarnim Wagle has directed Nepal Rastra Bank officials to urgently provide relief to those who have inadvertently become trapped in the vicious cycle of being blacklisted. This announcement has raised optimism among businesspeople. However, experts working in the banking sector have advised caution to ensure such policy changes do not create further distortions.
Speaking at a ‘Citizens, Policy, and Leadership’ program organized by his party, the Rastriya Swatantra Party (RSP), on Thursday, Minister Wagle responded to parliamentary questions, indicating that efforts are underway to address issues related to the blacklist.
“Currently, around 170,000 Nepalese entrepreneurs are facing financial difficulties, including bounced checks. We have initiated steps to resolve this,” he said.
Nepal Rastra Bank’s policy during the Covid-19 pandemic included blacklisting individuals who dishonored checks, leading to a rise in the number of blacklisted people. Previously, only those defaulting on loans were blacklisted.
A significant proportion of those on the blacklist are businesspeople in both categories.
“We receive complaints daily from businesspeople across districts who are facing hardship due to blacklisting,” said Surkrishna Vaidya, Senior Vice President of the Federation of Nepalese Chambers of Commerce and Industry. “We have been appealing to the Finance Minister and Prime Minister to simplify this problem.”
According to Nepal Rastra Bank policy, individuals who fail to repay loans or dishonor checks can be blacklisted. However, experts caution that loosening laws and policies related to dishonored checks could recreate previous distortions.
“As Nepal Rastra Bank itself formulates these rules, it has the authority to amend them, but the reasons and methods of doing so are crucial,” said former executive director Narbahadur Thapa.
What Finance Minister Wagle Said
Image Source, NRB
The increasing number of blacklisted individuals has negatively affected loan disbursal. Despite improved market liquidity and lower interest rates, loan disbursement remains unsatisfactory. The fact that many active entrepreneurs are on the blacklist is also seen as a contributing factor.
Typically, bank accounts of blacklisted businesspersons are frozen, restricting their ability to invest further.
In this context, Minister Wagle noted that initiatives are underway to provide relief.
“I have instructed the newly appointed Deputy Governor of Nepal Rastra Bank, Dirgha Rawal, to prioritize how relief can be extended to Nepalese brothers and sisters who have unknowingly been blacklisted. The Ministry of Finance will provide full support,” he said.
However, he did not clarify how these individuals ended up on the blacklist “unwittingly.”
Banks classify borrowers who intentionally default and those who cannot pay due to hardship as ‘willful’ and ‘non-willful’ defaulters, but such distinction does not always apply in cases of dishonored checks.
“Banks provide three opportunities regarding dishonored checks. First, they request, ‘There are insufficient funds in your account; please deposit.’ Only if this fails does the person get blacklisted,” explained former director Thapa.
Statistics
According to Nepal Rastra Bank data, the number of blacklisted individuals has been rising annually.
In the most recent fiscal year alone, more than 60,000 individuals were added to the blacklist.
In fiscal years 2079/80 and 2079/81, 52,303 and 53,571 people joined the blacklist respectively, rising to 60,447 in 2080/81.
Before blacklisting due to dishonored checks became common, only 6,514 people were blacklisted in 2077/78.
Nepal Rastra Bank officials say this increase is due to defaults on loans and particularly dishonored checks.
How to Resolve the Problem
Nepal Rastra Bank determines who is placed on the blacklist.
According to Section 79 of the Nepal Rastra Bank Act, 2058, borrowers with bad debts and those who dishonor checks are included on the blacklist.
This provision grants Nepal Rastra Bank full authority to regulate commercial banks and financial institutions’ operations, including issuing and enforcing rules, orders, and directives as needed.
In Thursday’s discussion, Minister Wagle also hinted at the possibility of amendments through proper legal procedures. “This is a country governed by the rule of law, and we must proceed according to legal and procedural frameworks,” he stated.
With the increasing number of blacklisted individuals, complaints have risen, and Nepal Rastra Bank is aware of this issue.
“We are consulting on this matter; no decision has been finalized yet,” said spokesperson Sudha Shrestha.
Concerns
Former executive director Thapa emphasized the importance of caution to prevent recurrence of distortions when improving blacklisting systems.
He explained that, during the Covid-19 pandemic, many irregularities surfaced in the banking sector, which led to the inclusion of dishonored checks in the blacklist process.
“Checks are financial instruments and must be respected. If problems arise, one should communicate with the bank rather than resorting to political leadership. Business should not thrive on irregularities,” he added.
Business leaders argue it is unfair to treat those who willfully default on loans and those who face genuine difficulties in the same manner.
“More than half of the 60,000 people blacklisted last year fell into financial hardship while conducting their businesses. Once one is blacklisted, it affects their trade as well, spreading effects like contagion,” said Vaidya of the Industry and Commerce Federation.
“We are working to ease this problem.”
Officials from Nepal Rastra Bank have indicated that the bank is seeking public feedback on this issue.
“Discussions are still ongoing; outcomes are not expected until February. It is unclear what changes will be implemented,” said a spokesperson.
For additional content and videos related to this article, please visit our YouTube channel and follow us on Facebook, Instagram, and Twitter. You can also listen to our evening radio program at 8:45 PM.