1.What  is the Magnitude of Non-Performing Assets of Banks?

In the distant past, banks had to deal with only few cases of bad-loans. So, they used to take legal actions against chronic defaulters of bank-loans. For the last ten/twelve years, banks are suffering from a large chunk of non-performing loans (assets) as a consequence of economic as well as non-economic factors in the country. By international parameter, non-performing   assets of a bank should not exceed ten percent while such an indicator is estimated to have been crossed 26 percent, (Rs. 31 billion in aggregate) mainly due to the increase in willful defaulters in the government, semi-government and private sector banks.

2.How the Debt Recovery problem is being addressed ?

Recovery of bad loans by banks and financial institutions has turned into a big issue in the financial sector of Nepal. This has greatly caused negative impact upon Banks' profit, government revenue and the overall financial sector of the country. This calls for an effective system and mechanisms that case the early recovery of debts of Banks and also of bank-like institutions as specified by Nepal Rastra Bank-the Monetary  Authority.

3.What is the purpose of  this website   ?

Against the above backdrop, a special institutional mechanism has  been evolved  to address the debt-recovery problem through judicial steps and early settlement of cases. This initiative needs to be transparent and informative to all concerned.  Considering the above reality, Debt Recovery Tribunal (DRT) has set-up the following pages where visitors can acquire information on the introduction, powers, functions and jurisdiction and status report regarding different petition lodged with the Tribunal .

4.What is Debt Recovery Tribunal. Is it operational  ?

Constituted under the  Act of Recovery for Debts of Banks and Financial Institutions 2058 (2002), Debt Recovery Tribunal is a 3 Member judicial body that not only takes decision on the petition filed by a Bank, or a Financial Institution but also recovers, as per the verdict, the bad loans and gets them provided to the concerned lending agency. As per the decision of the Council of Ministers, the Tribunal came into operation along with the Act which became effective from  July 17, 2003.

5.What are its Functions, Duties and Jurisdiction ?

The Tribunal shall have power to originally try and settle case on recovery of loans of banks and the financial institutions. The jurisdiction of the Tribunal shall be all over the country and shall exercise all powers equal to that of a district court.  All undecided  cases lying in the district courts shall be transferred to the Tribunal under the provision of the Act. The tribunal have the same powers including to issue summons, summon presence of petitioner, defendant, witness, administer oath, take deposition, examine proofs,   evidence and necessary documents or statements, require submission of documents, require furnishing of security and impose punishment as the court of law has under the prevailing law. 

If the Tribunal holds that its contempt has been committed, it may punish the accused with a fine or imprisonment or with both.

6.Can the Tribunal issue an interim order ?

If the Tribunal thinks that it is necessary to withhold the security or the movable or immovable property owned or possessed by, or title to which it belongs to, the guarantor of the borrower so as to prevent such security or property from being transferred, transmitted or sold, the Tribunal may issue an interim order to the concerned office to withhold such property until another order is issued.

7.Who are eligible Lending agencies for filing the case ?

·All commercial banks

·Agricultural Development Bank

·Nepal Industrial Development Corporation

·Other financial institutions as specified by Nepal Rastra Bank from time to  time.

The above agencies can file the petition if the principal recoverable is N.Rs 500,000 or more. Also they must fulfill the following conditions to file the petition:

(a)Ample discussions and activities were held and carried out with the borrower to settle, or cause to be settled, the debt,

(b)The bank and financial institution took adequate action on the recovery of debt but the debt could not be recovered.

8.Is there any time-limit to file the case ?

They must file a petition within the following time limit.

(a)In the case of loans already matured at the time of commencement of the Act, within 3 years from the date of commencement of the Act.

(b)In the case of loans matured after the commencement of the Act, within 3 years from the date of such maturity.

9.Whether the petitioning bank is required to pay recovery fee ?

After a loan has been recovered, the concerned lending agency shall pay 1.00 percent of the loan amount to the Tribunal. This also includes the fee of 0.25 percent paid at the time of filing the case.

The loan recovery fee shall be deposited to the specified Revenue Account of His Majesty's Government of Nepal.

10.Is there  any time limit to take judicial decision by the Tribunal ?

The Tribunal has to try and settle a case filed under the Act not later than 150 days from the date of submission of a note of defense, if not submitted, from the date of expiration of the time limit for the filing of a note of defense.

11.Can there be a compromise between the petitioner and the defendant (s) ?

Yes. If both plaintiff and defendant (s)  make an application on compromise to the tribunal and both parties agree to enter into compromise after hearing the contents of the application read out to them and understanding the meanings and consequences thereof  made well-known to them, the tribunal may have compromise irrespective of the stage of case proceedings.

12.Can a party to the case appeal in the upper judiciary ?

The dissatisfied party may file an appeal within 15 days, to the appellate tribunal along with cash deposit-30 percent- of amount held  recoverable by a decision made by the Tribunal.

The one member Appeal Hearing Authority normally shall decide the case within 90 days. In the context of loan recovery his/her decision shall be final and no further appeal can be made.

13.How does the Tribunal  implement its decision   ?

After the case is decided, the Tribunal has to issue an order in the name of Loan Recovery Officer to implement the decision through him along with cooperation of various agencies and individuals as specified in the Rules framed under the Act. While issuing such order the Tribunal may also specify a period for the implementation of the decision.

If the debt recovery officer be in need in the course of implementation of a decision, he may seek assistance of the local administration and police. If assistance is so sought by the debt recovery officer, the local administration and police have to render assistance to the officer.

14.What is the power of Debt  Recovery Officer ?

The order issued by the Debt Recovery Officer shall deemed to be the order issued by the Tribunal. If any person disobeys any order given by the Debt Recovery Officer, the Tribunal may institute contempt proceedings against that person under the provision of the Act.

In recovering the principal and interest of a loan, the Debt Recovery Officer, may follow the following procedures:

In consistent with the decision of the Tribunal the Debt Recovery Officer may follow the following procedures, subject to the prevailing law.

(a)to take possession of, or auction, the borrower's other movable or immovable property whether furnished as security or not,

(b)to take possession of, or auction, the guarantor's movable or immovable property,

(c)Where any individual is a borrower or guarantor, to arrest such individual and detain him pursuant to the prevailing law.

15.How does the Tribunal make the proceeding of the case ?

The detailed Rules framed under the Act have already been made effective by the Government. The Tribunal may determine its procedures on its own subject to the Act.