Problems Arising from Vehicle Auction and Re-registration Issues: Lack of Parking for Unpaid Loans

BFIS News
2025 Mar Sat 06:03

Problems Arising from Vehicle Auction and Re-registration Issues: Lack of Parking for Unpaid Loans

Kathmandu – Due to inefficient transportation management practices, banks are facing significant challenges with vehicle auctions. When a vehicle that has already been auctioned is re-auctioned, the system that does not allow re-registration of such vehicles has been causing trouble for both transport entrepreneurs and banks.

According to Clause 11.1.5 (4) of the Transport Management Directives, 2074, it states, "If a vehicle that has been registered once is re-auctioned, the vehicle must be scrapped according to regulations. Such vehicles will not be re-registered."

In cases where a bank or financial institution lends money against a vehicle as collateral and the borrower is unable to repay, the bank must auction the vehicle according to the rules. However, due to the current legal framework, re-auctioning the vehicle is not allowed. As a result, banks cannot finance such vehicles.

This has led banks and borrowers to increasingly sell the vehicles to a third party by mutual agreement, rather than proceeding with the auction process. However, due to the current severe economic crisis and complex conditions, banks are unable to find third parties willing to purchase these vehicles under agreement.

This has led to an increase in situations where vehicle owners hand over their vehicle keys to the bank and abscond. Narayan Raj Adhikari, an information officer at Citizen Bank, shared that managing parking spaces has become increasingly difficult due to the growing number of vehicles being abandoned in this manner. He also mentioned that despite repeated notices issued by banks for vehicle auctions, the vehicles are not being sold. The Transport Management Directive of 2074 has made even zero-kilometer vehicles difficult to auction.

Transport entrepreneur Santosh Prasai points out that vehicle sales are not taking place even with brand-new vehicles. Suppliers, who typically rely on bank loans to import vehicles, are unable to sell them due to the complex circumstances. As a result, banks are forced to auction these vehicles, and another supplier has to come forward to purchase them. However, when a new supplier tries to purchase the vehicle by using it as collateral, the bank cannot finance the vehicle, as the same issue may arise for the new supplier, making it impossible to auction again.

This means that no entrepreneur can buy a vehicle through auction under the current system. This has become a headache for both banks and transport entrepreneurs. The Department of Transport Management seems unaware of this impractical situation.

In a conversation with Engineer Shrikant Yadav, Director of the Department of Transport Management, he stated that the department has never looked at the issue from this perspective. He explained that when the Transport and Traffic Management Act, 2049 was created, guidelines for scrapping vehicles were established. The law recognized that once a vehicle reaches 20 years of age, it would not be re-registered, and should instead be scrapped when auctioned. However, the rise of electric vehicles has invalidated this assumption, as there is no defined lifespan for electric vehicles like there is for petrol or diesel vehicles.

Yadav also mentioned that the Act is currently in the process of being amended, and discussions on this issue could be incorporated. He emphasized that it would be easier to implement changes in the law rather than in the directives. He also expressed his commitment to engaging in extensive discussions with relevant stakeholders regarding the future of scrapping vehicles in relation to the banking sector.

Experts suggest that there needs to be a clearer distinction between vehicles that are due for scrapping and those that are not. Specifically, vehicles that are auctioned after reaching the end of their lifespan should be treated differently from those that are auctioned before they reach 20 years. This differentiation could help resolve the issues faced by banks and vehicle owners under the current legal framework.