BFIs are also deducting money from other accounts of borrowers in the same bank

KATHMANDU, JULY 9

Banks and financial institutions have started deducting money from borrowers’ deposit accounts after they failed to repay loans and interest dues on time.

Borrowers are required to have a deposit account while taking a loan from BFIs to deposit/pay instalments. As borrowers are finding it hard to repay loans and interest dues due to the lockdown, BFIs themselves have started deducting interest instalment of the borrowers from their accounts without the consent of borrowers, which, however, is allowed by Nepal Rastra Bank laws.

As per NRB’s provision, BFIs can deduct amount worth the instalment to be paid by the borrower through his/her loan account, which is opened to repay loan and interest.

However, NRB does not allow BFIs to deduct money from any other account without the consent of the borrower.

With the government imposing the lockdown on March 24 to combat the spread of COVID-19, a majority of borrowers have not been able to repay their loans and interests. After a few days of the start of the lockdown, NRB deferred the loan and interest repayment period of March, April, May and June till mid-July for all borrowers.

However, banks have started deducting instalment and interest amount from loan accounts of borrowers as the central bank has not extended the deadline for borrowers to repay dues. The central bank is, however, preparing to extend it through the Monetary Policy for fiscal year 2020-21 soon.

“As the NRB’s previous decision has given mid-July deadline for borrowers to repay loans and interest dues, banks have started deducting dues from borrowers’ accounts. Not just from loan accounts, BFIs are also deducting money from other accounts of borrowers maintained in the particular bank,” said Kamlesh Agrawal, vice-president of Nepal Chamber of Commerce.

According to him, many borrowers have certain amount in other accounts for administrative and salary payment purposes which banks have started deducting to clear instalments. “As borrowers are in a very difficult position and have no business, the NRB should immediately extend the loan repayment period through Monetary Policy and restrict BFIs from deducting borrowers’ amount from their accounts,” added Agrawal.

A banker accepted that banks had been deducting money deposited at borrowers’ loan accounts, as well as other accounts. “While money is being deducted from borrowers’ loan accounts without their consent as borrowers should clear instalment dues by mid-July, banks have been deducting such amount from other accounts of borrowers with the consent of the borrowers,” claimed a banker, seeking anonymity.

Meanwhile, NRB officials, who did not want to be named, said such a case had not come to the notice of the central bank. They said BFIs had no right to deduct money from accounts of borrowers other than the loan account.

“We’ll verify if that is being done and dissuade banks from doing so,” said an NRB official.

A version of this article appears in e-paper on July 10, 2020, of The Himalayan Times.