Introduction
Bank blacklisting in Nepal is a formal regulatory mechanism used by banks and financial institutions to identify individuals or entities that have failed to meet their financial obligations. Governed primarily by the Nepal Rastra Bank Act, 2058 (2002) and the Banks and Financial Institutions Act (BAFIA), 2073 (2017), blacklisting restricts access to banking services, credit facilities, and, in some cases, government-related opportunities.
At Onesphere Law Associates, we regularly advise individuals, companies, and foreign investors on blacklisting risks, compliance, appeals, and removal procedures under Nepalese banking and financial laws.
Legal Basis for Bank Blacklisting in Nepal
The authority to blacklist defaulters arises from multiple legal instruments, including:
- Nepal Rastra Bank Act, 2058 (2002) – Empowers NRB to regulate banks and maintain defaulter records
- Banks and Financial Institutions Act, 2073 (2017) – Defines default, recovery, and appeal mechanisms
- Credit Information Act, 2060 (2004) – Regulates credit reporting through the Credit Information Bureau (CIB)
- Banking Offence and Punishment Act, 2064 (2008) – Addresses fraud and banking-related crimes
The Credit Information Bureau of Nepal (CIB) maintains a centralized blacklist accessible to all licensed banks and financial institutions.
Common Reasons for Bank Blacklisting
Individuals and entities may be blacklisted for the following reasons:
- Loan default beyond agreed repayment terms
- Cheque bounce due to insufficient funds (after repeated presentation)
- Credit card non-payment
- Misuse or diversion of loan funds
- Submission of false or misleading information
- Fraudulent financial activities
- Bankruptcy or insolvency proceedings
- Court-ordered blacklisting
Banks are required to report defaults exceeding 90 days and loans equal to or above NPR 1 million to the CIB.
Bank Blacklisting Process in Nepal
Step 1: Identification of Default
Banks continuously monitor loan accounts. A borrower is classified as a defaulter under BAFIA if repayment obligations are not met.
Step 2: Issuance of Legal Notice
The bank must issue a written notice, allowing the borrower a reasonable opportunity to repay, restructure, or explain the default.
Step 3: Reporting to Credit Information Bureau
If the borrower fails to respond, the bank submits blacklisting details to the Credit Information Bureau in accordance with the Credit Information Act.
Step 4: Decision to Blacklist
Based on NRB directives and internal assessments, the borrower may be formally blacklisted.
Step 5: Appeal and Removal
Blacklisted individuals or companies have the legal right to appeal. Upon settlement of dues or a successful appeal, removal can be requested following NRB’s Blacklisting Removal Guidelines.
Duration of Bank Blacklisting
The blacklisting period depends on the severity of the default:
- Minor defaults: 1–3 years
- Serious defaults: 3–5 years
- Fraud-related cases: Up to 10 years
Early removal is possible upon full settlement and compliance with prescribed procedures.
Consequences of Bank Blacklisting
Being blacklisted can result in:
- Ineligibility for loans and credit facilities
- Restrictions or freezing of bank accounts
- Severe impact on business operations and reputation
- Disqualification from government contracts or procurement
- Possible criminal liability in fraud cases
- Difficulties in visa, travel, and employment matters
Blacklisting in Public Procurement (PPMO)
Apart from banking, blacklisting also applies in public procurement under the Public Procurement Act, 2063 (2007).
Authority
The Public Procurement Monitoring Office (PPMO) has the power to blacklist bidders, suppliers, consultants, and contractors for unethical conduct.
Grounds for Procurement Blacklisting
- Anti-competitive practices
- Corruption, fraud, or misrepresentation
- Failure to sign contracts after selection
- Poor performance or breach of procurement contracts
- Criminal conviction related to procurement
Duration
Blacklisting in procurement generally ranges from 1 to 3 years, depending on the gravity of misconduct.
Cheque Bounce and Blacklisting
In cheque dishonor cases:
- The cheque must typically be presented up to three times
- Upon repeated dishonor, the bank may apply to the CIB for blacklisting
- Criminal liability may also arise under applicable laws
How to Avoid Bank Blacklisting
- Maintain timely loan and credit repayments
- Communicate proactively with banks during financial distress
- Ensure cheques are backed by sufficient funds
- Regularly monitor credit reports
- Seek legal and financial advice before defaults escalate
Our Legal Services on Bank Blacklisting
Onesphere Law Associates provides comprehensive legal support, including:
- Advisory on banking compliance and default risks
- Representation in blacklisting appeals
- Negotiation with banks and financial institutions
- Assistance in blacklisting removal and rehabilitation
- Due diligence and credit compliance reviews
- Legal support in procurement-related blacklisting cases
Conclusion
Bank blacklisting in Nepal is a powerful regulatory tool aimed at protecting the integrity of the financial and procurement systems. However, it carries serious legal and commercial consequences. A clear understanding of the legal framework, timely action, and professional legal support are critical in preventing or resolving blacklisting issues.
At law firm in Nepal, we are committed to safeguarding our clients’ financial and legal interests through strategic advice, effective representation, and compliance-focused solutions.