Kathmandu, August 16:

The Finance Committee of the House of Representatives is to instruct the government to speed up recovery of defaulted loans, when it quizzes finance minister Dr Ram Sharan Mahat on Thursday.

“The committee will ask the finance minister on the progress made on the financial sector reform programme with a particular emphasis on recovery of defaulted loans, which according to Nepal Rastra Bank (NRB), is at an alarming stage,” Dr Dilli Raj Khanal, UML lawmaker, who is also a member of the committee, told this daily.

NRB, on Tuesday, had disclosed that 53 business groups and firms have defaulted on their loans amounting to Rs 25 billion to the banking sector and the recovery was impossible unless stringent measures were taken to ensure payback of the loans from wilful defaulters.

Dr Khanal further said that the committee would ask for reasons for the sluggish progress on reform programme, despite the government’s huge investment. According to him, the committee will also instruct the government to look into the root causes of default cases including assessment of collateral and approval of loans.

The government has already borrowed about seven billion rupees from the World Bank under the financial sector reform programme including reforms in the country’s two largest public sector commercial banks-Nepal Bank Ltd (NBL) and Rastriya Banijya Bank ((RBB).

The parliamentary committee is also set to quiz it over performance and achievements of hiring foreign management at these two banks. “We will discuss on details to propose an appropriate way out that will serve the interests of depositors as well as improve the fiscal health of the banking system,” Dr Khanal added.

Submitting the details to the committee, NRB governor Bijaya Nath Bhattarai had urged parliamentarians to make the issue of defaulted loans a national agenda and instruct the government to take strong actions against wilful defaulters. Bhattarai had also revealed that the banking sector’s non-performing loans (NPL) stand at 18 per cent of the total investment, which is almost four times higher than international standards.

RBB is to recover Rs 10.51 billion taken as loans by 29 individuals and firms, while NBL is struggling to recover Rs 4.68 billion from 24 business groups. These amounts include both principal and interests.

Industrialist Rajendra Khetan was of the view that stringent measures should be taken to make willful defaulters payback their loans. “The government must be aware that the larger number of businessmen are not willful defaulters. If strong measures are initiated, about 80 per cent loans will be collected within a few months,” he added.