The finance ministry is reported to have moved to act against big bank-loan defaulters in execution of a cabinet decision of December 15 last year. This has given hope that the government may at last have started the process of collecting delinquent accounts that total some thirty billions rupees. Though, for the past three years, government leaders have expressed their resolutions to crack down on the wilful defaulters, nothing concrete happened. The cancellation of the passports of 80 blacklisted defaulters associated with 17 business houses ranks among a host of measures envisaged. Though full facts about the actions are yet to emerge, the acid test of the government’s resolve is whether it will be able to recover the overdue loans, most of which had been taken from the Nepal Bank Ltd. and the Rastriya Banijya Bank, the first a partly and the second a wholly state-owned commercial enterprises.

Sadly, even this much-delayed show of government activism has been due mainly to heavy pressure from various quarters, including the multinational donors. Therefore, it is not unnatural for one to entertain doubts about the government carrying the action to its logical conclusion sans constant public or donor vigilance. Successive governments, their policies and their corruption-friendly conduct have created the present mess in the financial sector, and, oddly enough, the government has incurred an additional foreign debt of some seven billion rupees just to clean it up. In light of these facts, the government dithering until now does not bode very well for good governance. However, to make the initiated action effective and credible, the government must avoid being selective or practising favouritism.

Though the government should not show any leniency towards intentional delinquents, it ought to demonstrate a fair degree of consideration for those who have been unable to pay up despite their best intentions. But all should be made to repay in full in the end whether they made profits or incurred losses, or whatever they might have made of the borrowed money. For those whose liabilities exceed their assets, insolvency law could provide an answer. But, the vast majority of the big defaulters have been living in luxury and they are still very much into business. Loan re-scheduling should, therefore, be employed only in the few genuine cases. The collateral most of these debtors offered to the lending institutions have turned out to be far less in market value than the amounts of their loans. Most certainly, this would not have been possible without the collusion of bank employees, officials or bigwigs. To make the crackdown fair and complete, therefore, proceedings need to be started also against these people, wherever they may be now. In addition, no hesitation should be shown in taking further tough steps, if need be. Neither the financial sector nor the economy as a whole can flourish without dealing with financial delinquency or corruption with an iron hand. While the present initiation of action should be considered a positive development, it will be premature to be overly enthusiastic about it until the full results are out.