Last week’s nine-point agreement between the government and interest loan victims included a provision on canceling fake documents, prompting increased attention on their definition.
The agreement specifies that documents related to interest loan exploitation, such as promissory notes, liens, registration confiscation papers, and binding checks, shall automatically become illegal.
However, an expert noted that identifying and canceling such documents is not straightforward.
“The government has said it will cancel fake documents. But who will certify whether a document is fake?” asked Uttamraj Subedi, former Deputy Inspector General of Nepal Police and former member of the commission tasked with solving the interest loan problem.
“Even if there is a basis for determining if a document is fake, actions are currently taken under the law.”
The agreement also states that within three months a draft of a new law will be prepared. This law will establish a separate tribunal to address interest loan cases, ensure the return of victims’ property, and provide appropriate compensation.
Subedi suggests that the upcoming law should clearly define minimal standards for promissory notes, cautioning that without clear definitions, even legitimate transactions or bank-issued notes could risk cancellation.
Campaigner Nirg Naveen, who facilitates the movement, explains that loan sharks often issue promissory notes at inflated values exceeding the actual transaction amount, making it difficult to identify interest charged beyond government limits.
“Therefore, the agreement includes testing promissory notes in forensic laboratories and tracing the source of the lender’s assets,” says Naveen.
Pushkar Sapkota, Chief Secretary of the negotiation committee formed by the government for talks with interest loan victims, confirmed that fake documents will indeed be examined.
“Some courts will also make final judgments. Documents will also be sent for forensic testing. The results will be clear only after the analysis,” he said.
What Is the Legal Framework?
According to committee chief Sapkota, Nepal’s current law prohibits charging interest above 10 percent. The study on whether taking interest above this rate should be considered fake is ongoing.
“Previously, interest matters were civil in nature, meaning individuals had to file cases themselves. Now, the aim is to reclassify this as a criminal offense,” Sapkota explains.
The agreement also encourages verifying transactions through ward offices, in line with the current legal requirement to certify transaction documents.
Nepal’s Muluki Civil Code mandates that ‘head promissory notes’ exceeding NPR 50,000 must be certified by the local government.
Following recommendations by the commission led by former Special Court Chairperson Gauribahadur Karki in 2021, the Ministry of Federal Affairs and General Administration directed all local levels to certify even old transaction documents.
“Cancellation of all documents related to interest exploitation is a mandatory condition for resolving the issue. Until these are canceled, the problem cannot be solved,” said campaigner Naveen.
“The state will determine what to do with legitimate documents based on its processes. But the Struggle Committee’s stance is that legitimate documents must not be canceled.”
Previously, the Karki-led commission had made two primary recommendations aimed at bringing justice for interest loan victims and preventing future excessive interest exploitation.
According to commission member Uttamraj Subedi, the commission had proposed that old documents must be certified at the ward level; otherwise, they would be invalid. A delegation including the Assistant Chief District Officer formed a taskforce at the district level.
This taskforce was empowered to resolve disputes in old documents through mutual understanding and proceed with legal action if no agreement was reached.
How Many Are Affected?
According to campaigner Naveen, over 60,000 people are directly affected by interest loan exploitation, with the number potentially rising further.
So far, three different commissions led by Gauribahadur Karki, Tejbahadur Karki, and Baburam Regmi have been formed to investigate the issue.
“All three commissions requested applications, and around 60,000 people filed complaints, but we have no official information from the state,” Naveen said.
According to a report submitted by the commission led by Gauribahadur Karki in Mangsir 2080 (mid-2023), 28,000 victims from 67 districts had filed complaints. Among these, the commission mediated settlements in 5,000 cases.
Naveen noted that some issues may have only reached the police or district administration offices and not the commission itself.
What Are the Root Causes of Interest Loan Exploitation?
Photo source, PM Secretariat
According to commission member Subedi from the Gauribahadur Karki-led panel, multiple communities in the Terai-Madhesh region have a tradition of taking loans at exploitative interest rates for education, health care, rituals, and foreign employment.
“We had recommended lending from government funds specifically to support foreign employment,” he said.
The commission noted that recommendations to discourage costly rituals and improve health insurance have not been implemented.
“Loans at exploitative interest rates are commonly taken for foreign employment, education, and marriage. The dowry system in the Terai remains deeply entrenched and rituals are expensive,” Subedi said.
“When illness strikes and hospital visits are needed, but money is unavailable, institutional loans are hard to access. Victims are forced to borrow from moneylenders.”
Sapkota said groundwork on legal framework recommendations for regulating promissory note transactions and prosecuting offenders is underway.
“A law is expected within three months. The Home Ministry will prepare the draft, after which further decisions will be taken,” he stated.
How Optimistic Are the Victims?
Photo source, Nepal Photo Library
Naveen, representing the interest loan victims in talks, says he is more hopeful about the current agreement than previous ones.
“I was a signatory to all four talks. This time, the Home Minister directly engaged with ordinary citizens to discuss the demands,” he said.
“The document was jointly prepared rather than positions being opposed. The negotiation team was led by the Cabinet, and the Prime Minister’s Office Chief Secretary himself participated.”
Victims say this government has shown more willingness than previous administrations, according to Naveen.
Following the agreement, reports surfaced of moneylenders protesting in several districts.
“The document and agreement are good but there remains concern that implementation might suffer the same problems as before,” Naveen stated.
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