Satya Narayan Yadav, a victim of exorbitant lending in Mahottari, had taken a loan of Rs350,000 from Upendra Kumar Shrestha of the same district. But Shrestha was demanding repayment of Rs1.5 million from the borrower. As Yadav failed to re-pay the amount Shrestha asked, Yadav was forced to register a plot of land he owned in Shrestha’s name.

After an inquiry commission was formed to resolve the problems created by loan sharks, Yadav registered a complaint about how Shrestha forced him to surrender his land.

The commision brought the two sides together and settled the dispute with mutual consent. “The two sides agreed that Rs800,000 would be paid by Yadav in exchange for Yadav returning his land,” the commission said.

Ram Dulari Devi of the same district had borrowed Rs300,000 from Dinesh Sah. But then Sah demanded Rs1.2 million from Devi to clear the loan. The commission brought the two sides together and asked them to settle. According to the commission, they agreed that Devi would pay Rs650,000 to Sah while the latter would return the borrower’s lands that he had taken control of.

Efforts to settle the dispute over loan sharking through mutual consent appear to be paying off to an extent. “As of Friday, 564 cases of loan sharking have been settled through a compromise decree,” said Gauri Bahadur Karki, chairperson of the commission.

But the commission has not had the time to try to mediate in all disputes: there are over 21,000 complaints registered across 67 districts. According to the commission, the victims are mostly concentrated in nine Tarai districts, particularly the eight of Madhesh province.

After the victims protested in Kathmandu for several days asking for justice, the government in early April formed a commission headed by Karki, who is also the former chairperson of the Special Court.

After collecting the complaints, the commission had formed a task force in each district headed by an assistant chief district officer to try to settle the disputes through a compromise decree. The taskforce has been inviting both the sides to reach a compromise, as far as possible, officials involved in the process said.

Of the total 21,000 complaints, Bara reported the highest number (3,322), according to the commission. A task force headed by assistant chief district officer of the district Krishna Prasad Acharya has been working to bring about a compromise.

As many as 120 cases of lending at exorbitant interest rates have been settled through compromise decree till Friday, said Acharya. “As a part of the decree, alleged loan sharks have returned the lands they captured and some have settled the dispute through a negotiated amount of loan repayment.”

Remarkably, almost all the cases that were negotiated between the victims and the lenders ended in a compromise. But the taskforce is yet to invite both sides for settlement in the majority of cases.

In Sarlahi, the number of cases where the two sides have reached a compromise is not very high. “So far, 64 cases of loan sharking have been settled through a compromise decree,” said Hom Prasad Ghimire, assistant chief district officer. “In some cases, the alleged loan sharks have agreed to return the seized lands too.”

According to Ghimire, the taskforce he heads has so far brought together the disputing parties in around 500 cases. The commission had received 1,920 complaints against loan sharks in the district.

Officials said the failure of the two sides to maintain proper documents on loan deals was the main cause of disagreement.

This makes facts hard to establish, said Ghimire. General impressions of the officials after hearing arguments from both sides is that borrowers have been victimised in the majority of cases.

“Borrowers are mostly poor people who took loans at interest rates as high as 36-60 percent a year,” said Ghimire. “When they cannot repay the loan on time, the lenders add the interest to the principal. This makes it even more difficult for the borrower to pay back. As a last resort, they register land in the name of lenders,” said Ghimire.

According to the commission, one reason why the lenders are coming to compromise is that they fear prosecution under a new ordinance on loan sharking.

“We have issued a stern warning to the alleged loan sharks that they could face prosecution based on the new ordinance,” said Karki.

The ordinance, introduced on May 3, criminalises loan sharking. It defines loan sharking activities and specifies penalties for the perpetrators.

According to the ordinance, loan sharking includes making victims sign a promissory note without any money being lent, mentioning higher amounts in the documents than what was actually lent, and preparing a promissory note by adding the interest to the principal before lending.

Other punishable offences involve not providing receipts for the amounts paid by the borrowers, threatening and exploiting borrowers, and seizing their properties.

The ordinance also provisions jail terms for loan sharks up to seven years along with fines as high 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,” says the ordinance.

The ordinance has also amended the National Criminal Procedure (Code) Act-2017 to provision prosecution of loan sharks under the anti-money laundering law.