KATHMANDU, MAY 5
The government has issued an ordinance amending some provisions of the Muluki Civil Code proposing to impose a jail term up to seven years and a fine of Rs 70,000 on loan sharks. The government's move comes in the face of prolonged protests by victims of usury.
The ordinance, which came into force yesterday, prohibits improper transactions. It says if anybody is found to have made a loan deed for which the lender has not actually given loan, or if anybody inflates the loan amount, or counts interest as principal amount, or refuses to give receipt of payment and seeks more interest than the principal amount, that will be deemed improper transaction.
The new law also prohibits lenders from issuing threats to borrowers or subjecting them to any exploitation or getting the borrower's property registered for the disbursed loan.
The ordinance says if any lender is guilty of having made improper loan deed, getting the borrower's land property registered in his/her name, such property transfer will be deemed invalid.
With respect to loan deeds made before the enforcement of these provisions, the ordinance says no one should do anything prohibited by the ordinance or harass borrowers. The new law also says if anybody is found to have extorted money from borrowers, lenders will be made to pay the amount in question to the borrowers. It says both lender and borrower should mention at least one witness from their sides.
The ordinance says that if any lender has not registered his/her loan deed with the concerned ward office, then they should do so within six months and the ward offices should verify the details of the transaction. Ward offices are required to maintain record of loan deeds.
The ordinance also stipulates that if it is found that somebody has lent huge amount of money without registering the deed, a probe against him/her shall be conducted under the anti-money laundering act. In the fraud chapter, the ordinance has also incorporated the word 'improper transaction.' The government had recently formed a three-member commission under retired Judge Gauri Bahadur Karki to probe accusations of usury. The commission has already started work. The government has pledged to implement the findings of the commission.
A source said that the government brought the ordinance in the face of usury victims' prolonged protests, but the measures might not to be panacea. There have been cases of improper transaction where the courts has given their final verdicts. This ordinance cannot do anything in this regard.
The flip side of this new measure is that genuine lenders, who have lawfully lent money to people, will now shy away from lending money to their neighbours, the source added. People borrow money from local lenders as banks are not easily accessible, particularly to the poor.
According to the source, unequal power relations are the root cause of usury and as long as these relations exist in society, the problem of usury will remain. The source also said some people who had borrowed money from genuine lenders had infiltrated the usury victims' protests taking advantage of the situation. Such people should be discouraged.
The flip side of this ordinance is that genuine money lenders will now shy away from providing loans to those in need
