The Debt Recovery Tribunal is facing mounting pressure as the number of cases continues to rise, driven by sluggish economic activity and weak loan recovery by banks and financial institutions. By mid-February of the current fiscal year (FY) 2024/25, the tribunal had registered 436 cases, marking a nearly 50% increase compared to 293 cases during the same period in the previous fiscal year. In FY 2022/23, only 162 cases had been filed by this time, highlighting the sharp rise in bad loans.

According to Devendra Dhakal, Information Officer of the tribunal, the surge in cases is primarily due to the economic slowdown and the decline in real estate prices, which has hindered loan recovery from collateral. The tribunal registers cases when banks fail to recover loans even after auctioning the pledged collateral.

Santosh Koirala, President of the Nepal Bankers' Association, noted that legal provisions requiring financial institutions to file a complaint within four years of a loan's due date have also contributed to the increase in cases.

Established in 2004 under the Banks and Financial Institutions Debt Recovery Act, 2002, the tribunal handles cases involving loans with a principal amount exceeding Rs 500,000. If banks are unable to recover a loan despite reasonable efforts, they must register a case within four years of the due date.

As of mid-January in the current fiscal year, the average non-performing loan (NPL) ratio of BFIs stood at 4.92%. Among them, commercial banks reported an NPL ratio of 4.73%, development banks 5.11%, and finance companies 12.85%, according to data from the central bank.

Despite the growing number of cases, the tribunal has struggled in recoveries. By mid-February, a total of 887 cases were pending, including 451 carried over from the previous fiscal year. The tribunal has settled only 198 cases through verdicts, settlements, or compromises, leaving 691 cases undecided.

Additionally, the implementation of verdicts remains slow. Of the 557 cases awaiting implementation—362 of which were transferred from the previous fiscal year—only 201 have been executed so far. The tribunal reports that 356 verdicts are yet to be enforced. Dhakal attributed the weak recovery to financial institutions' inability to trace the assets of defaulting borrowers.