Kathmandu. Banks are currently under stress and pressure due to non-performing loans. They are lobbying for it to be facilitated. For this, the bankers have demanded that flexibility should be adopted by amending the existing system of loan loss and classification of loans.
Bankers are lobbying to classify bad loans only after two years and provide 100 percent loan loss. Bankers have demanded that it be taken forward vigorously. Nepal Rastra Bank (NRB) is currently in the fiscal year 2082 BS. The monetary policy of 83 is in the making stage. Banks are demanding that these provisions should be included.
Nepal Bankers’ Association (NBA), an umbrella organization of commercial banks, has sent suggestions for the monetary policy for the next fiscal year, demanding a revision in the regulatory policy to classify bad loans only after two years of crossing the deadline and provide 100 percent loan loss. Banks insist that the provision of classification of existing loans and the provision to maintain for loan loss is very strict, so it should be amended. “The time period of classification of loans and the loan loss arrangement should also be reviewed,” the association said.
According to the association, the existing loan classification and loan loss management policy should be revised and the loans that have exceeded the limit for three months should be classified into good categories and only 1 percent loan loss should be arranged. Similarly, 25 percent loan loss should be provided for loans that have exceeded 3 to 1 year and 50 percent for loans that have exceeded 1 to 2 years. Bankers have stressed on the need to classify bad loans only after more than two years of crossing the deadline and provide 100 per cent loan loss.
At present, 1 percent of loans classified into good category, 5 percent of loans that have exceeded 1 to 3 months, 25 percent of loans that have exceeded 3 to 6 months, 50 percent of loans that have crossed 6 months to 1 year and 100 percent of bad loans after one year of expiry.
They have demanded to revise the existing policy as the non-performing loans of banks have increased and the loan loss system is increasing. Bankers say that although banks have to invest in loans to increase economic activities, they have not been able to invest due to pressure from capital funds.
In recent years, the bank’s non-performing loan recovery has been challenging. The private sector has been affected by the slowdown in the economy. As a result, they have not been able to demand and invest in loans.
Despite the low interest rate, there is a sufficient amount of investable money in the bank due to lack of demand for loans. Only half of the loan investment target has been disbursed.
