Though the government has now introduced an ordinance to criminalise loan sharking, the agitating victims of usurious lending are concerned over the law’s implementation and the return of their properties seized by lenders.

Amid intense pressure from the loan shark victims—a group of them have continued their sit-in at Kathmandu’s Ratna Park for almost a month—President Ramchandra Paudel on May 3 issued an ordinance on the Cabinet’s recommendation.

The ordinance, which was tabled in the House of Representatives on Sunday, amended the Criminal (Code) Act-2017 and the Civil (Code) Act-2017 and Criminal Procedure (Code) Act-2017, criminalising usurious lending.

The government, last month, also formed a three-member inquiry commission headed by former Special Court chair Gauri Bahadur Karki to prepare a concrete and practical report and recommend a solution to the problems of loan shark victims.

“We welcome the introduction of a law to criminalise loan sharking and forming the commission,” said Awadhesh Kushwaha, coordinator of the Farmers-Workers Struggle Committee against Loan Sharking and Frauds. “But we are concerned if the new law would be retrospective and whether we will get our seized properties back.”

The new group of loan shark victims led by Kushwaha has been staging a sit-in after the government signed a five-point agreement with another group comprising victims of various districts of eastern Tarai which had earlier protested in Kathmandu.

The commission was formed in line with the agreement. A deal has also been reached to request the government to expedite the process to amend the laws to criminalise unscrupulous lending. Although an agreement was signed with one group, the group led by Kushwaha is still agitating, saying a similar agreement signed with the latter in September last year is yet to be implemented.

A major demand of the loan shark victims was speedy introduction of a law criminalising the practice.

“We will continue our agitation to ensure that the new ordinance is implemented,” said Kushwaha. Currently over two dozen victims have been staging a sit-in at Shanti Vatika, Ratnapark, according to him.

The ordinance, which was introduced on May 3, defines loan-sharking activities and specifies penalties to be imposed on the perpetrators.

The ordinance defines activities such as making victims sign a document without any money being lent, mentioning higher amounts in the document than what was actually lent, and preparing a document by adding interests to the principal before lending, as loan sharking.

Likewise, not providing the receipt for the amount paid by the borrower; threatening borrowers and exploiting them and seizing properties of borrowers based on inappropriate lending are other activities defined.

The ordinance also has a provision of jailing loan sharks for up to seven years and fining as much as Rs70,000.

As per the ordinance, if a loan shark has confiscated cash or property of the borrower, equivalent cash or property should be returned to the borrower.

“If it is proved that the ownership of fixed assets of the borrower has been transferred in the name of a person nominated by the loan shark, such transfer becomes null and void,” the ordinance states.

By amending the National Criminal Procedure (Code) Act-2017, the ordinance also contains a provision for prosecuting loan sharks under the anti-money laundering law.

“If a lender, during the process of inquiry by the investigating officer, is found to have lent an unexpectedly high amount of money unofficially, such a lender will be subjected to investigation and necessary action under the anti-money laundering law,” the ordinance says.

Karki, coordinator of the newly formed commission, said that the provisions in the ordinance were enough for the time being to prevent unnecessary harassment of the victims by loan sharks.

“Following the ordinance’s issuance, there have been reports from districts like Mahottarai and Dhanusha where loan sharks have been threatening borrowers to immediately clear the loans,” said Karki. “We have been asking the victims to immediately report any such harassment to the police.”

He said those harassing the victims could be punished. There are, however, concerns over whether the ordinance will become a full-fledged law.

According to Article 114 (2) of the constitution, ordinances should be tabled at the first meeting of the new session of both chambers of the federal parliament.

In case the ordinance tabled on Sunday is not adopted by both the House of Representatives and the National Assembly, it shall, ipso facto, cease to be effective. It may be repealed at any time by the President and if the ordinance is not repealed in either way, it will be valid only for 60 days following a meeting of Parliament.

If the sessions of both the Houses are held on different dates, the 60 days start from the meeting held on the latter date, according to the constitution.

A replacement bill should be introduced either with the same provision of ordinance or amended provision and such bill should be endorsed by both Houses within 60 days of tabling the ordinance to ensure that the replacement bill becomes a law, according to the House of Representative Regulation-2022.

Kushwaha said that they are concerned about the ordinance’s implementation. “As loan sharks have brought court cases against the victims, we are not sure whether the ordinance covers it,” he said. “We are also not convinced with the formation of the commission as it has a limited mandate of recommending measures to solve the problem. The government may not implement its recommendation, given its poor track record.”

Karki said that the commission was taking complaints from across the country by setting up loan shark victim desks at District Administration Offices. “The victims have to register their complaints by mid-May with all the details, and there is a possibility of extending the deadline a little further,” he said.