After the Public Accounts Committee (PAC) failed in its efforts to have the big defaulters of bank loans cough up and its recent recommendation for the impeachment of four Supreme Court judges for their allegedly prejudiced verdict in favour of a big defaulter got brushed aside, it is now planning loan recovery from smaller debtors. In this regard, Chitra Bahadur KC, communist chairman of PAC, held a meeting with Bharat Bahadur Karki, chairman of the Nepal Bank Ltd., and they both agreed that the state review the policy of charging compound interest on loans. KC said the government should now concentrate on smaller debtors by offering them some incentives even though it has been unable to make the big defaulters repay the banks. According to Som Bahadur Thapa, the PAC secretary, compound interest renders it difficult for small debtors to pay up.

But concern for loan recovery will not mean much if the dues cannot be collected. The PAC chairman’s admission of the state’s helplessness before the big defaulters, most of whom are businessmen, puts a question mark over the ability of the parliament and of the government to introduce the promised radical reforms in the country if they cannot compel a few unscrupulous businessmen return the ordinary people’s money literally lifted, courtesy the Nepal Bank Ltd and the Rastriya Banijya Bank. This speaks volumes for the kind of sovereignty the parliament is supposed to be exercising, as well as for the SPA government’s commitment to rectify the past mistakes in governance, imbibing new democratic values, including good governance and zero tolerance to corruption. Governments have promised over the past several years to recover big loans with resolve, but nothing concrete has happened so far, with even the court now being publicly seen to have favoured big defaulters.

Against this background, any official move to start putting pressure on small debtors may be questioned on moral grounds. If a government or the parliament cannot act against some four dozen businessmen who have defaulted on loans in excess of Rs.25 billion, then does it have the moral authority to move against small loan-takers, or rather to continue to rule in the name of the sovereign people? PAC is considering the possibility of some concessions, such as a waiver of compound interest, to induce debtors to pay up. Such a step in the case of debtors with genuine reasons can indeed be justified. But all businessmen, all the more so the big ones, know that once they take loans, they will be liable to compound interest if they do not pay interest on time. Besides, banks already have a policy of offering partial or full interest waivers in genuine cases. But, here too, wilful defaulters or those with connections have mostly taken the lion’s share of such concessions in the past. This trend needs to be reversed. Besides, poor people who have been unable to return the loans despite their best intentions may even merit consideration for substantial waiver of the principal itself.