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Non-banking assets of banks and financial institutions (BFIs) have increased significantly as their non-performing loan (NPL) levels rise.

A recent report by the Nepal Rastra Bank (NRB) shows that NPL levels of banks and financial institutions currently stand at 3.98 percent. Consequently, non-banking assets of commercial banks have increased by over Rs 15bn in a one-year period. Banks and financial companies (BFIs) have Rs 27.6bn worth of non-banking assets as of mid-May, compared to Rs 15.77bn worth of non-banking assets in mid-May 2023.

A large share of such assets is with commercial banks. According to the NRB, 20 Class ‘A’ banks in the country have Rs 23.74bn worth of non-banking assets, which is about Rs 10bn more than the Rs 13.19bn worth of non-banking assets they held in mid-May 2023.

Similarly, development banks have Rs 2.51bn worth of non-banking assets, up from Rs 1.7bn worth of such assets in mid-May 2023. Likewise, finance companies have Rs 1.34bn worth of non-banking assets. The Class ‘C’ companies had non-banking assets worth Rs 793m in mid-May 2023.

Non-banking assets are properties acquired by banks and financial institutions (BFIs) in settlement of their debts. When a borrower is unable to repay the loan in cash, banks seize properties pledged as collateral against such loans. BFIs are required to dispose of such assets at the earliest to convert these non-cash assets into cash assets for their regular banking business.

The central bank requires BFIs to set aside a provision equal to 100 percent of the asset’s value from the moment they acquire non-banking assets to mitigate risk. This requirement has led to an increase in the banks’ provision amounts.

Bankers are under stress due to the increase in non-banking assets. They have not been able to sell off these properties despite publishing auction notices repeatedly. The slowdown in real estate transactions has further aggravated the situation for them. 

Meanwhile, the existing land ceiling regulations have created problems for banks in acquiring such assets.

NRB preparing to open ‘Bad Bank’

The central bank has begun preparations to open a bad bank for the management of non-banking assets with different BFIs.

Speaking at a program recently, Governor Maha Prasad Adhikari said the central bank was drafting the necessary policies for establishing a bad bank.

A bad bank is an entity set up to buy the bad loans and other illiquid holdings of BFIs. BFIs holding significant non-performing assets can sell these assets to the bad bank at market price, which will give them liquidity to focus on their banking business.

The central bank has concluded that an asset management company should be established through specialized legislation. Stating that a bad bank would become a real estate company if it were to open under existing laws, the central bank has been advocating for the creation of an entity with special capabilities.

A consumer is an individual or entity that purchases or consumes goods and services for personal use or to satisfy their wants and needs. Examining the pattern of consumption, all individuals or organizations in society act as consumers in some form, as the seller or provider of a product or service. Every individual is covered by consumer protection laws. So it is important to understand that safeguarding consumer rights is safeguarding the rights of all individuals in society.

In Falgun 2078, Nepal’s Supreme Court ordered the government to set up a consumer court in all seven provinces to defend customers' interests in the face of recurring allegations of unfair market practices. A division bench of Justices Bam Kumar Shrestha and Nahakul Subedi said in their decision: “... with the necessary coordination with the relevant stakeholders, if further study-research is required, the consumer court as per Section 41 of the Consumer Protection Act, 2075 should be formed as soon as possible.” 

However, there isn’t any indication yet of a consumer court being established in any of the country’s seven provinces.

Consumerist movement’s background and development

Ralph Nadar, the leader of the consumerist movement, started the consumer protection campaign for the protection of basic rights related to the daily life of individuals. Consumer rights are viewed as a fundamental aspect of human rights due to their connection to the overall quality of life. Consumer rights advocate for consumers to have access to high-quality goods and services, offered at the right time, price, and with convenience.

Since the beginning of the 19th century, many countries have become more aware and vocal regarding consumer rights protection. For the first time in the world, the United States of America enacted the Consumer Rights Act in 1962. US President John F Kennedy was the first person to raise his voice regarding consumer rights. He mentions four types of consumer rights: safety, quality, choice, and information.

Consumer rights in a federal system

The constitution serves as both a crucial principle for governing the state and a key document ensuring all the rights of its people. Establishing coordination between the ruler’s jurisdiction and the people's rights is also accomplished through the constitution. The constitution plays a crucial role in ensuring a balance between the governing authority and the governed. It serves as a legal tool to provide direction to the government, grant authority to the government, and oversee the use of that authority.

The Constitution of Nepal, 2015 provides the basic legal structure for protecting consumer rights. Consumer rights are recognized as a fundamental right in Article 44 of the Constitution, which ensures the right to obtain quality goods and services and to be compensated for any violations of these rights. Consumers are also sovereign parties who are related to all three levels of government, so it is necessary to have mutual coordination in laws, structures, and data systems.

The Consumer Protection Act, 2075 guarantees consumer rights, outlines seller and distributor liabilities, and enforces regulations for the goods and services supply chains. Section 41 of the Constitution establishes the existence of a consumer court, while section 50 addresses the process for seeking compensation.

Institutional arrangement

The Consumer Protection Act, 2075 provides for the formation of a 15-member Consumer Protection Council under the chairmanship of the Minister of Industry, Commerce and Supply. Its main task is to formulate policies on the protection and implementation of consumer rights. Similarly, under the chairmanship of the Secretary of Industry, Commerce and Supply, there is a nine-member central market monitoring committee, whose main task is to coordinate among the agencies involved in the monitoring or supervision of the supply of goods or services, price, quality, and purity for the protection of consumer rights.

Provincial and local levels have also been given the responsibility of consumer interest protection and market monitoring. For this, there is a legal provision to form a provincial monitoring committee and a local market monitoring committee.

Furthermore, at the district level, district administration offices and industry, commerce, and consumer protection offices have been made responsible for consumer protection. The consumer association is also directly involved in consumer protection. For cases other than section 40 (1) of the Consumer Protection Act, 2075, there is also a provision for a three-member consumer court with a district judge and two deputy secretaries of justice services.

Consumer court holds significance in Nepal

A consumer court is a specialized court that focuses mainly on resolving consumer-related disputes, conflicts, and complaints. The court convenes hearings to settle these matters. For a while now, people have been requesting a consumer court to hold dishonest traders accountable through a quick legal process.

Observers claim that unscrupulous traders have become more confident as consumers avoid becoming entangled in complicated legal battles, especially at the Supreme Court. According to them, once consumer courts are in place, it will be simpler to lodge complaints and there will be less inconvenience.

The establishment of a consumer court is essential in order to prevent actions that harm consumers and hold those responsible accountable. There is a need for the prompt establishment of a consumer court to take legal measures against individuals who harm the well-being and health of the less fortunate by manufacturing and distributing inedible goods. Consumers are not aware of their rights. Raising awareness about consumer rights is essential.

In a nutshell, Nepal must take immediate steps to establish a consumer court to protect the rights of its citizens. The government must prioritize this issue to ensure that consumers are protected and have access to swift and effective legal remedies. With the establishment of a consumer court, consumers in Nepal can have confidence that their rights will be protected, and that they will be able to seek compensation and legal remedies without unnecessary delays or hurdles.

Nepal’s farm sector needs a shot or two in the arm in view of changing weather patterns amid a deepening climate crisis and forgotten yet effective traditional agricultural practices. 

For revitalization of this sector, every farmer needs to know what crops (traditional, modern, cash crops, etc) can grow well in their land. It is the duty of every local government to make sure that the farmers know this.   

Who among these farmers want to opt for subsistence farming? Who wants to go for commercial farming and who prefers surplus farming?

Relevant authorities should take a call on this because the needs of these separate groups of farmers are quite different.    

Subsistence farmers need nothing, surplus farmers need guaranteed markets at their doorsteps whereas commercial farmers need guaranteed connections of national markets and knowledge to preserve their productions in a variety of ways. 

It is the duty of Palikas (rural municipalities) to lease the parcels of land to the poor people interested in farming or sell it to them by accepting payment in installments.  

Farmers also need to bear in mind that our ancestors switched to new crops in keeping with changing climatic conditions, including the availability of water. They need to realize that food patterns have been changing over generations and time has perhaps come yet again to change our food habits in keeping with a changing climate.  

In this regard, we can take a leaf from Vedic ancestors, who taught us to blend science and intellect and sustain it culturally.  For example, they taught us how to tap into the cosmic energy to rejuvenate ourselves. Planting Tulasi, Pipal and Sami was their way of ensuring a steady supply of pure oxygen and antioxidants.

Let us learn about sustainable development goals (SDGs) from our religious texts and cultural practices, and unlearn from the past efforts of government as well as non-government organizations (GOs/NGOs), if we are to indeed give sustainable development a boost in our soil. 

Commission-oriented practices of politicians and businesspersons, in particular, have led to soaring imports of substandard foodstuffs of inferior quality, making the Nepali farmers reluctant to cultivate crops. So, we must make it loud and clear to our neighbors that these food imports have made our people lazy, and increased health hazards.

Our import-oriented economy throws ample light on the country’s crop production scenario. Politicians least bothered about crop yields, a labor-intensive farming system, unethical business and trade practices, and consumption-oriented mindsets are responsible for inviting this situation. 

To overcome this scenario, let us make a matrix of our food demands, our production, the gaps, crops that we must grow, and local governments that can grow these crops.  This matrix will help to move ahead with crop production plans.  

Commitment requires continuity—in saying and doing—something, which can be done by developing all political parties’ consensual intent, programs, funding mechanisms and an accountable implementing agency, which will remain there regardless of who comes to power. But none of the rulers and potential rulers are heading in that direction, pointing at the absence of their commitment to the cause. 

Summing up, the Nepalis possess a number of indigenous skills to fill up their stomachs.  

Ignoring this heritage, we followed westernization in the name of modernization in the farm sector as well. So, let’s first learn to differentiate between the two and go for modernization of what we have. Secondly, our developmentalists adapted the deficiency thesis. Let’s follow an efficiency thesis to enable poor people for a self-sustaining economy.  Thirdly, let us encourage industrialists and businesspersons to establish organic industries.  Fourth, we exhausted our land by using chemical fertilizers and pesticides, sidelined the local and indigenous wisdom, and replaced indigenous crops. Let’s move ahead by learning lessons from these mistakes. Fifth, we became consumers and inhuman businesspersons to feed long grain rice and poisonous vegetables, poultries and pigs laced with chemicals. Let’s reflect on this moniya culture (money is supreme) and work for human and nature- friendly productions.

The CPN-UML has said that President Ram Chandra Paudel should initiate the government formation process as per Article 76(2) of the Constitution after the incumbent Prime Minister Pushpa Kamal Dahal “loses the crucial floor test” in the Parliament on July 12.

A meeting of the party’s Secretariat meeting has taken such a decision. After the meeting, UML leader Pradeep Kumar Gyawali said: “There are no constitutional and legal ambiguities regarding the government formation process, there are precedents vis-a-vis government formation as per Article 76(2) of the constitution.” 

Furthermore, he said the NC and the UML will participate in the government on an equal basis.

It should be noted that NC and UML, the largest and the second largest party in the Parliament, have agreed to form a national unity government to address burning issues facing the country. 

Against this backdrop, the UML meeting has decided to strive for bringing in “more and more parties” in the government. While addressing the party meeting, party Chairperson KP Sharma Oli said there has not been any concrete agreement with the NC about forming a commission for suggesting ways to form the next government.

According to the UML chair, there has been a principled position on constitution amendment but no discussion has taken place (between the two parties) on specific issues concerning the amendment. Oli accused ‘some forces’ of trying to create confusion about the NC-UML agreement.

We have realized that some provisions in the Constitution should be amended in keeping with changing times, he said. Oli is of the view that Prime Minister Dahal, at the helm of a minority government after the UML’s recent withdrawal, is still working to prevent UML from forming the next government by refusing to step down.

The NC and UML have agreed to form a national unity government but the text of the agreement has not been made public yet. As things stand, Oli is supposed to become the PM in the first phase and then hand over power to Deuba for the remaining term. PM Dahal is seeking a vote of confidence on Friday amid speculations that odds are stacked against him.  

Meanwhile, the UML has issued a whip to all its members in the House of Representatives (HoR) to mandatorily attend a session of the lower house scheduled for July 12 and to vote against PM Dahal.