In line with suggestions from the World Bank, the government has handed over Rastriya Banijya Bank and Nepal Bank to foreign management. This idea hasn't worked anywhere else. In Nepal, the 'reform process' in these government-run banks has already begun, leaving us with no choice but to wait and watch.
The first move by the foreign managers was to address the exploitation of government banks by big businesses. It's a reasonable response considering that many business houses have siphoned off huge amounts from banks ostensibly for industrial investment, but really to line their own pockets.
With such precedence, Nepal Bank's drive to collect 'bad debts' cannot be faulted. It has rightly targeted influential industrialists and businessmen who are defaulters. After all, how can a bank survive without repayment of loans? However, certain banking norms need to be followed. These have to do with agreements when the initial investment was made. The police or the CIAA have no job interfering, and to do so will be to double-cross customers and erode the bank's credibility.
If all else fails, the banks always have the recourse of seizing collateral assets and auctioning them off. These are normal banking procedures for defaulters. The question is, given the political and economic situation in the country, can banks realistically pursue such forceful methods? They may make short term recovery, but damage their overall existence. The government and Nepal Rastra Bank are on a tightrope.
Private industries and businesses face tough times, most situations are outside their control. Not all businessmen are intent on cheating banks, and the fact remains that a majority have suffered due to mismanagement and the deteriorating security situation. That said, if banks exert pressure on business houses, the latter will be probably have to liquidate. Just as well that the private banks have not started turning the screws yet.
If the industries still running with some degree of efficiency come to a grinding halt, the plight of our economy will only worsen. The government must not be a mute spectator. It must come up with viable alternatives to rescue sincere and able industrialists. Banking and industry share a symbiotic relationship-one cannot exist without the other.