Since the ordinance that criminalised the practice of loan sharking lost its validity on July 5, the District Administration Office, Dhanusa is struggling to bring alleged loan sharks to compromise and settle disputes with their victims.

Last week, the government was unable to table a bill in the lower house to replace the ordinance, which was introduced in early May, owing to parliamentary obstruction by opposition parties including the CPN-UML that were protesting a controversial statement made by the prime minister.

The National Assembly endorsed the replacement bill on June 30. According to the constitution, any ordinance not adopted by Parliament within 60 days of the commencement of the House session loses effect.

Its impact has been clearly visible in the efforts of the inquiry commission that was formed to resolve the problems caused by usurious lending. The commission aims to bring the lenders and borrowers to a compromise by giving priority to out-of-court settlement.

After collecting complaints from victims, the commission had formed a task force in each district headed by the assistant chief district officer to try to settle the disputes through a deed of compromise.

“After the ordinance became invalid last week, the creditors have been reluctant to come to the DAO to seek a compromise with the victims,” said Kashi Raj Dahal, chief district officer of Dhanusha district. “The ordinance had given authority to the government to prosecute loan sharks on criminal charges. As the loan sharks face no fear of being charged for criminal offence following the expiry of the ordinance, a large number of them are refusing to entertain our calls for compromise with the victims.”

According to Dahal, as many as 2,615 complaints were registered with the commission from Dhanusha. “The creditors and the borrowers have reached a compromise on a total of 335 cases on a claimed amount of Rs63.5 million,” he said.

The trend of not responding to the calls of the commission to settle disputes through compromise decree has grown since the ordinance’s expiry ordinance, according to the commission.

“When the ordinance was in force, there was a pressure on loan sharks to settle disputes through a deed of compromise because the ordinance had criminalised their acts,” said Gauri Bahadur Karki, chairperson of the commission. “Now, we are hearing that some of the alleged loan sharks have registered complaints that they were forced into compromise against their will.”

He said that the commission has been ensuring the settlement of disputes by documenting exact loans provided to the victims and limiting the interest rate at no more than 10 percent.

According to the commission, it has so far received 24,000 complaints from loan shark victims and around 20,000 of them are from eight districts of Madheh and Nawalparasi (Susta West). Of the total complaints, around 1,800 have so far been settled through compromise, paving the way for the return of 8 bigha (5.42 hectares) of lands to victims from lenders, according to Karki.

When the ordinance was in force, the commission would warn the lenders that they could be prosecuted as per the ordinance if they didn’t come for a compromise.

“As a result, many loan sharks had agreed to settle disputes by withdrawing court cases and also promised to return the lands they had seized from borrowers,” Karki said.

The ordinance, which was introduced on May 3, had criminalised loan sharking and specified penalties.

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

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

The ordinance had also made provisions of jail terms of up to seven years along with fines as high as Rs70,000 for loan sharks.

As per the ordinance, if a loan shark had confiscated cash or property of the borrower, an equivalent sum 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,” stated the ordinance.

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

When the ordinance was introduced two months ago, it seemed that all political parties were in agreement on punishing loan sharks amid strong protests in Kathmandu by the victims.

But it now appears that the tide has turned in favour of the loan sharks with the ruling parties being divided on the provisions, which are no different to those in the ordinance, in the replacement bill endorsed by the National Assembly last month.

The ruling Janata Samajbadi Party is at the forefront of the protest against the continuation of the same provisions in the new bill.

It argues that the existing provisions in the replacement bill, which has already been endorsed by the National Assembly, aim to punish the offenders who committed offence even before the law comes into effect.

“We protested against the bill due to the retrospective provisions,” said Pradeep Yadav, chief whip of the parliamentary party of the Janata Samajbadi Party. “The bill also does not seek to punish the loan sharks who have institutionalised their practice.”

He was of the view that because of the ordinance, even honest creditors, who wanted to help the needy, have been reluctant to lend. According to Yadav, he has also registered an amendment proposal to the current bill.

But Karki claimed that the ordinance had no provision of punishment for past crimes. “The provision of the ordinance would be attracted only if the lenders continued to harass their borrowers after the enforcement of the ordinance,” he said.

When the ordinance became invalid last week, loan shark victims staged protests in Kathmandu. Deputy Prime Minister and Home Minister Narayan Kaji Shrestha on July 9 visited the victims and assured them that the government was determined to get the bill endorsed from Parliament.

But dispute within the ruling alliance has emerged as a big threat to the efforts at ending illegal lending practices.

Yadav made it clear that the Janata Samajbadi Party would vote against the bill if it is tabled in the House of Representatives in the existing form. So the House is likely to see a showdown between lawmakers from different parties that are supporting and opposing the bill, which has been registered in the lower house but has yet to be tabled.

The Rastriya Swatantra Party on Friday threatened to obstruct House proceedings if the replacement bill was not tabled immediately.

Party chair Rabi Lamichhane criticised the government for not introducing the bill, saying that his party wants to see the bill endorsed through a fast-track process.

The commission chair Karki, however, suspects that influence of loan sharks on the political leaders might be the reason behind the current stalemate over the bill. “Many political leaders are financed by loan sharks and we cannot deny their influence on the political parties and leaders.”