KATHMANDU: The central bank may have weaknesses but it will take stern action against those who flout rules, said Nepal Rastra Bank governor Dipendra Bahadur Kshetry at an interaction on ‘Non-Performing Assets (NPA) and its implication’ organised here on Sunday by a monthly magazine Eikyabadhata.

“The central bank is the regulatory and monitoring authority of the financial market. It gives a chance to financial institutions to revive, if they are genuine, but the central bank cannot remain silent. If necessary, it takes stern action also,” Kshetry added.

He said Nepal Development Bank (NDB) was given time to improve its financial health and internal management but seeing its decline NRB bank had to send it into liquidation.

For the sound health of financial institutions, they should take care while floating loans. “The process of floating loan has created more bad loans as loans are not floated according to norms but under political pressure,” he said adding that the committee to identify big loan defaulters has already submitted two reports to the central bank.

The central bank has frozen bank accounts of 121 big loan defaulters, 21 debit and credit cards, seven lockers and one fixed account with Rs 6 lakh. According to the amended rule, Rs 10 million and over defaulters are big loan defaulters. Earlier, loan defaulters over Rs 50 million were big loan defaulters.

Bankers present agreed that they have to maintain integrity while floating loans. “Then, there won’t be bad loans,” they said.

“A banker knows better at the time of issuing the loan whether it is a bad loan or not,” said Anil Shah, vice-president of Nepal Bankers’ Association (NBA) and CEO of Nabil Bank. “Risk analysis should be strenghtened to reduce NPA,” he said.

Jhapat Singh Bohara, president of Nepal Development Banks’ Association and CEO of Malika Bikas Bank also agreed that norms should be followed. He accused big borrowers of wilful default.

CEO of Agriculture Development Bank Ltd Janak Raj Shah concurred, saying, “Small borrowers do not default on loans. It is the big and politically-backed borrowers who default on loans,” he said adding that bankers should be held responsible for loan default.

Ramesh Bhattarai, chief administrator of Employment Provident Fund (EPF), however, blamed the central bank delaying in taking action against NDB. “The central bank should have acted 10 years ago,” he said. EPF has 10 per cent, NRB has five per cent, Beema Sansthan has five per cent and IDBI-India has 10 per cent promoters’ share in ailing NDB.