The Rastriya Banijya Bank (RBB) says it has begun taking steps to salvage what remains of the country\'s largest bank. We have problems but we\'re doing our best to find ways to resolve them, was the gist of what Punya Prasad Dahal, executive chairman of RBB, told the Public Accounts Committee (PAC) last week.

Dahal, however, admitted that the bank would not be able to recover all of its bad debts, and said that a high-level committee should be formed to decide how to get the money back. Some of the bank\'s bad loans date back to the mid-1960s, and the borrowers either do not want to or cannot pay them back.

The PAC has formed a five-member subcommittee to study the various audit reports-including the one by the international auditing group, KPMG, that had declared RBB "technically insolvent"-and recommend measures to keep the government bank afloat.

RBB has begun a credit audit of some of its larger loans to provide a basis for recovery. As things stand today, we may have to take over ownership of all the large hotels of Kathmandu Valley to get back our money, Dahal said, indicating who some of the bigger defaulters were.

According to the RBB, based only on principal and not accumulated interest, about 23 percent of its total investment of Rs 29.91 billion is either of "poor quality" or outright "bad." The bad and doubtful loans, defined as those whose repayments have been overdue by one year and above add up to Rs. 4.6 billion and an additional Rs 1.6 billion is overdue by six to 12 months.

One loan to a certain Bir Bahadur Rai which began with Rs 80 million now has overdue interest payments that add up to over Rs 750 million, bank officials said. Such loans are the most difficult to realise.

I will do the best I can to reduce irregularities by transferring managers," Dahal said, responding to MPs who said that corrupt bank officials were the major reason for RBB\'s bad loans. He added that loan recovery was a priority and a committee had already been formed to tackle this problem.

Another major problem with loan recovery, he said, was litigation, leading to indefinite delays in collection. About 165 such cases are pending in the courts, say bank officials Nepal does not have specific laws to address to loan recovery and existing laws are either inadequate or just unclear on how banks can go about getting back their money. Many borrowers continue to take advantage of the situation to delay their payments. The government had announced it would formulate laws to recover loans and cover bankruptcy declarations but both have been delayed because of the unceremonious end of the parliament\'s budget session, forced after inner-party wrangling in the ruling Nepali Congress began to spill over into the House debates.