KATHMANDU, August 2

The much-awaited Secured Transaction Registry Office will begin operation on August 18, paving the way for registration of all types of movable and intangible assets, based on which anyone, including individuals, can legally extend loans to others.

The office, located at Credit Information Centre Limited, was supposed to come into operation in mid-June. However, the plan was stalled due to devastating earthquakes of April and May.

“We are now all set to cater the service,” CICL CEO Anil Chandra Adhikari told The Himalayan Times, adding, “We have already trained officials of commercial banks and national-level development banks and finance companies and are planning to hold public awareness campaigns throughout the country to educate people about our services.”

Many have long been waiting for the establishment of the Secured Transaction Registry Office, as there is no place to register movable assets at present. Lack of such a facility has created roadblocks for individuals and small and medium enterprises from gaining access to capital, as they cannot always pledge fixed assets, such as land or buildings, to obtain credit.

But thanks to the Ministry of Finance, which has allowed CICL to set up the office. Now, anyone can register any type of movable asset, including fast-moving consumer goods, livestock and agricultural produce, as collateral and obtain loans from any individual or firm.

The registration process can be completed online upon payment of Rs 500. Also, two parties — the borrower and the creditor — should sign an agreement, clearly mentioning intervals at which instalments have to be paid, the payback period, and the party responsible for bearing certain expenses, like insurance cost, and taxes or fees associated with the collateral. This facility will enable even a farmer based in far-flung areas, such as Bajura or Mugu, to register goats, cows or paddy as collateral to legally obtain loan from another village resident. This was not possible in the past, as entities that were not registered at Nepal Rastra Bank were barred from extending credit.

“The basic idea here is to shift the risk that has currently centred around banking sector to non-banking sector. This, we believe, will help protect the economy even if problems crop up in the financial sector,” Adhikari had earlier told THT.

But this should not mean the whole purpose of the office is to promote shadow banking, as it is banks and financial institutions regulated by Nepal Rastra Bank that will initially benefit from the new service.

Currently, many financial institutions do not feel comfortable extending credit on the back of movable assets, as they cannot confirm whether the same collateral has been pledged at other institutions to obtain loans.

So, once the office comes into operation these institutions can keep tabs on these activities, allowing financial institutions to take informed risk. This means registration of movable assets will reduce risks associated with credit extension, providing impetus to growth of various sectors of the economy.

Despite these features, lenders, including individuals, firms and banking institutions, must practice caution while evaluating assets, so that investment could be fully recouped in case of defaults, Adhikari warned.