Money
Students relieved as court lifts collateral restrictions
A recent government decision barred land from being used as collateral to get a bank loan until it had been classified as agricultural or non-agricultural.Pawan Pandey
Australia-bound student Monika Gurung was delighted when the Supreme Court struck down a recent government decision preventing borrowers from putting up land as collateral pending land use classification.
On Monday, the country's highest court issued an interim order telling the government not to apply this provision in the land use regulations.
For Gurung from Lamjung and hundreds of other students aspiring to go abroad, the stipulation was a letdown, as it meant they couldn't get a bank loan without which they would not be able to pay for their studies.
Last Thursday, Monika’s father Amar Gurung had gone to the Land Revenue Office in Lamjung to complete the paperwork needed to get a bank loan, but he was sent back because of the latest government decision.
The decree stated that land could not be used as collateral until it had been classified as agricultural or non-agricultural land. Accordingly, banks started turning away borrowers wishing to take a loan against their land as security.
“I was deeply worried as we could not get a loan last week,” said Gurung. “I hope there won’t be any complications after the court's interim order.”
In a bid to stop haphazard use of land, the Ministry of Land Management issued a 12-point decision to facilitate the enforcement of the Land Use Act 2019 and Land Use Regulations 2022.
As land could not be used as collateral until it had been categorised, students seeking loans were dejected. Most countries require students to have an education loan to be permitted to study there.
Australia is the most sought-after destination for Nepali students. According to the Department of Home Affairs of Australia, 131,830 Nepalis were living in the country as of June 2020, almost five times the figure in June 2010.
Australia reopened its borders to international visitors in February after nearly two years due to the Covid-19 related restrictions. Hundreds Nepali students who had obtained visas and who were aspiring to study there were affected by the border closure.
“Definitely, many people could not secure loans by using their land as collateral after the government decision,” said Kiran Kumar Shrestha, chief executive officer of Rastriya Banijya Bank.
“Banks were obviously in a difficult situation. We had even raised concern through the Nepal Bankers’ Association,” he said.
The court order stated, “It looks like the categorisation of land as per the Land Use Regulations 2022, which is said to be the basis for the categorisation, has not been completed so far.”
The court said that since the provision violated the fundamental rights of citizens, the interim order has been issued not to implement the government decision.
Justice Ishwor Prasad Khatiwada issued the interim order in response to a writ filed by Vishnu Bahadur Sunuwar.
“We hope the court’s order will remove the difficulties to obtain loans,” said Shrestha. “We have no issue regarding the categorisation of land, but it should be done with proper planning, in such a way that businesses won’t be affected.”
Most Nepalis who go abroad for further education or jobs manage their finances through bank loans, educational consultancies told the Post.
"The government should have considered the immediate impacts before deciding to implement the laws and regulations," said Prakash Pandey, president of the Educational Consultancy Association of Nepal.
“It looks like the government made decisions without considering whether they would badly hit certain sectors,” Pandey said. “Around 1,000 to 1,500 students who had completed all the paperwork and were in the last stage of securing bank loans were immediately affected. The court’s interim order gave them a respite.”
Around 5,000 students aspiring to study abroad have recently applied for bank loans, Pandey added.
“We expect the Supreme Court’s final verdict will be practical. Around 40 percent of those who get the No Objection Certificate (NOC) from the Ministry of Education, Science and Technology go abroad,” Pandey added.
Around 12,000 to 15,000 students obtain NOCs monthly, according to chief of the NOC section Education Under-Secretary Hari Prasad Niraula.
“Our data shows that 102,873 individuals got the NOC in the first 11 months of the current fiscal year ended mid-June for different countries,” said Niraula. “The number of students getting NOCs from April 14 to June 19 was 30,473 individuals.”
Yubraj Katwal, immediate past president of the Free Educational Consultancies Organisation of Nepal, said, “The government decision was impractical. It has affected students, investors, bankers as well as general people.”
Katwal, who is also the chief executive officer of Ashford International, an educational consultancy at Putalisadak, added, "Instead of enforcing such a provision on an ad-hoc basis, the government should have finished categorising the lands first. We welcome the court’s interim order.”
Responding to the complaints from students and consultancies, government officials insist that the issue is not as immense as it was been made out to be.
“One can easily get a recommendation letter stating if the land is agricultural or non-agricultural from the Local Land Use Council and complete the paperwork at the Land Revenue Office to get a bank loan. The local executive itself functions as the Local Land Use Council,” said Janak Raj Joshi, joint secretary at the Ministry of Land Management.
"The purpose of the land related acts and regulations, besides the recent decision, is to prevent the rapid loss of agricultural lands and check unmanaged urbanisation. We need to consider the long-term impact of these decisions in light of food security, environmental protection and better land usage in the coming days,” Joshi said.
“We act in haste and repent at leisure,” said Bhuvan Dahal, former chief executive officer of Sanima Bank.
“While I don’t doubt the spirit of the recent decision related to land categorisation, I think it was made without proper homework and preparation,” Dahal said. “The classification of land should have been done before implementing such a decision.”