SC lets BFIs sell non-banking assets without approval

Kathmandu, Dec. 7

The Constitutional Bench of the Supreme Court has issued an interim order opening a path for banks and financial institutions (BFIs) to sell non-banking assets that have remained unsold and registered in their name for more than three years without the need for prior government approval.

The bench issued an interim order instructing the government not to implement the amended provision of Section 12 (cha) of the Land Act, 1964.

The provision requires the BFIs to sell non-banking assets—registered in their name after accepting auction bids during loan recovery—within three years, and to obtain approval from the government if the assets are not sold within that period.

Following this order, it is expected that the BFIs will receive some relief in managing and disposing of non-banking assets that have accumulated in their name due to loan recovery challenges amid the current economic slowdown, the Confederation of Banks and Financial Institutions of Nepal (CBFIN) said in a statement on Sunday.

A five-member Constitutional Bench comprising Chief Justice Prakash Man Singh Raut and Justices Kumar Regmi, Hari Prasad Phuyal, Dr. Manoj Kumar Sharma, and Dr. Nahakul Subedi issued the interim order on November 26, following the hearing of a writ petition filed by the CBFIN against the Government of Nepal and the Ministry of Land Management, Cooperatives and Poverty Alleviation, among others.

The Act Amending Certain Nepal Acts Related to Investment Facilitation, 2081, published in the Nepal Gazette in July 2024, had introduced Section 12 (cha) into the Land Act, 1964.

The amendment required that land acquired by a bank, financial institution, or cooperative in the course of securing loans—if no bidder accepted the auction and the institution itself was compelled to accept the property—must be sold within three years.

If unable to sell within that timeframe, the institution would be required to obtain government approval before the disposal of such land. Prior to this amendment, there was no statutory time limit for the BFIs to sell non-banking assets registered in their name.

In its writ, CBFIN argued that the amended section of the Act contradicted with the constitutional guarantee of property-related rights, so it should be annulled.

While hearing the petition, the Constitutional Bench observed that the BFIs are compelled to retain non-banking assets when loan-secured property cannot be auctioned, and that requiring government approval after three years to sell such assets could expose banks' investments to direct risk, the CBFIN quoted the order.

The Bench further noted that the question of whether Section 12 (cha) is inconsistent with Articles 17(2)(c) and 25 of the Constitution remains to be decided in the final hearing. It stated that implementing this provision before the final settlement of the petition could cause irreparable harm to the BFIs. 

Published in The Rising Nepal daily on 7 December 2025.