Kathmandu. The Genji agitation of September 23 and 24 and the subsequent violent incidents have further slowed down the country’s economic activities.
The movement has added more uncertainty to an already sluggish economy. As a result, the investment climate has weakened and the morale of the private sector has also decreased. The direct impact of these developments has been seen in the financial statements from commercial to development banks.
In recent days, banks have been emphasizing on loan recovery. However, bankers deployed in the field for recovery have started narrating the pain of returning empty-handed without recovery.
Data from both commercial and development banks shows that with the slowdown in the economy, the profitability of the banks is decreasing and the non-performing loans are increasing.
Bankers worry that the situation could deepen if the investment climate does not improve and confidence in the market is not restored.
They said that the government, regulators and the private sector should coordinate and take concrete steps for the revival of the economy.
Profit Contraction in Commercial Banks, Passive Credit Expansion{
With the slowdown in the economy, the profits of commercial banks are declining. In the first quarter of the current FY, the commercial banks have earned a net profit of Rs 13.14 billion. This is 18.5 percent less than Rs 16.12 billion in the same period of the last fiscal year.
The net profit of most of the banks has decreased compared to the previous year. Only a few banks have been able to increase their profits. Although the banks have been successful in increasing deposit collection, the loan flow has not increased in proportion. Bankers say that due to the decrease in demand for loan investment, interest income has weakened and the burden of provision has increased due to the increase in non-performing loans.
According to experts, production, trade and consumption have declined in all sectors due to the slowdown in the economy. They say that the demand for loans has decreased due to the low morale of investors and difficulties in recovery have also increased. As a result, banks’ interest income is decreasing and profits are drying up, they said.
Bankers, on the other hand, say that the agitation has affected the banking system. In such a situation, it is natural for the profit to decrease due to the increase in non-performing loans due to the inability to recover the loans. However, they fear that it will cause more problems in the coming days.
Not only the commercial banks, the situation of development banks has also become equally challenging. Due to the slow pace of the economy in the development banks, it is difficult to recover the loans and the loan classification seems to be moving towards ‘weak’ and ‘passive’.
The average non-performing loan ratio of 16 development banks has reached 5.74 percent in the first quarter of the current fiscal year. It was only 4.08 percent in the same period of the last fiscal year.
Jyoti Bikas Bank recorded the highest rate of non-performing loan (7.97 percent), Lumbini Bikas Bank (7.78 percent), Shangrila Bikas Bank (6.86 percent) and Mahalaxmi Bikas Bank (5.5 percent).
With the increase in non-performing loans, the profit of development banks has also decreased by more than half. In the first quarter of the current FY, the net profit stood at Rs 53.55 crore. It was Rs 1.17 billion in the same period last year.
The quest for political stability
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Now the private sector and the banking sector are looking for political stability in the country. They say that if political stability is ensured in the country, it will not take long for investment to increase. They say that with the increase in investment, the cash flow in the economy will increase and this will create a situation where the recovery will improve.
Bankers and businessmen say that elections are the best option for political stability. They also stressed on the need to ensure the security of the private sector for investment.
