Non-performing loans of banks climb to 3.27%
KATHMANDU, Sept 1:
Total non-performing loans (NPL) of commercial banks increased to Rs 29.18 billion in 2013/14.
According to unaudited financial results of 30 commercial banks, average NPL of a commercial bank stood at 3.27 percent of the total loans that they extended in the last fiscal year. Commercial banks extended total loans of Rs 892.26 billion at the end of 2013/14.
Average NPL of a commercial bank stood at 2.45 percent in 2012/13.
Sanima Bank Ltd had the lowest NPL of 0.02 percent out of the total loans amounting to Rs 20.41 billion in 2013/14, followed by Nepal SBI Bank (0.26 percent), Standard Chartered Bank Ltd (0.48 percent) and NMB Bank (0.55 percent). Century Commercial Bank Ltd, Lumbini Bank Ltd and Everest Bank Ltd were the other commercial banks with NPL below 1 percent in the last fiscal year.
According to the NRB requirement, commercial banks are required to contain NPL below 5 percent of their total loan portfolio.
With NRB acting tough against banks and financial institutions (BFIs) to improve their assets quality, commercial banks have been able to maintain NPL below the required 5 percent mark.
The central bank, however, is happy with the current nonperforming assets of BFIs.
“Despite several positive outcomes and move toward financial consolidation, assets quality of commercial banks has not improved. Although NPL level is less than 4 percent in industry average, a sizeable number of BFIs have reported high ratios of NPLs. Real estate concentration is still high, with more than two-third of loans collateralized by real estate but proper collateral valuation is missing ever,” reads the financial stability report published recently by the NRB.
The NPL of Kist Bank (24.18 percent) was the highest among 30 commercial banks in the country in the review year followed by Grand Bank Nepal Ltd (19.09 percent). Kist and Grand have total loan portfolio of Rs 13.73 billion and Rs 15.15 billion, respectively.
Grand Bank CEO Parshuram Kunwar Chhetri told Republica that the bank’s main priority was to recover bad loans within 2014/15. “Whatever happened earlier was not done on a mala fide intention. Most of the loans are backed by the land and building collateral. We will recover it by the end of the current fiscal year,” he added.
Meanwhile, Kist Bank has already started merger process with Prabhu Development Bank, Gauri Shankar Development Bank and Zenith Finance to form Prabhu Bank.
Upendra Poudyal, vice president of Nepal Bankers Association, told Republica that banks always try to bring down their NPA to zero percent. “As bigger NPL can hit their profit, banks try to reduce it as much as possible,” he said, adding that we can see improvement in the asset qualities of banks in recent years. Poudyal, who is also the CEO of NMB Bank, said NPL can go down further if macro economic situation improves and there is no drastic change in the country. “There is strict banking discipline and loans are not sanctioned haphazardly,” he added.
Source: Republica
