Kathmandu. The loan portfolio review (LPR) of major commercial banks has begun. Bangladesh’s Howaldar Yunus & Co Chartered Accountants Company has started asset quality audit of 10 commercial banks.
Global IME Bank is the first bank to be fully audited on the basis of the data of Chaitra 2081. Global IME is the bank with the highest assets as of March last year. During the period, the bank’s assets stood at Rs 674.84 billion.
Similarly, Global IME has loan of Rs 438.83 billion and deposit of Rs 537.69 billion.
Similarly, Nabil Bank, Nepal Investment Mega Bank, Rastriya Banijya Bank, Kumari Bank, Laxmi Sunrise Bank, Prabhu Bank, Nepal Bank and Himalayan Bank are the major banks in the market. According to the NRB, a full audit of these banks has started.
Nepal Rastra Bank (NRB) had selected the company through a tender on July 23. Nepal Rastra Bank (NRB) has already signed an agreement with Banker Yunus & Co for Rs 43.745 crore to test the loans of 10 big commercial banks as per the terms and conditions of the International Monetary Fund (IMF).
A total of 10 banks were selected for the test based on their loan portfolio and asset volume. The company will conduct offsite review of banks in the first phase and onsite in the second phase. Bangladeshi companies have to review their portfolios within 5 months.
The IMF did not believe in the bad loans in the Nepalese banking sector and had to get an audit done by an international firm. The IFF has been accusing the banking sector of ‘evergreening’ of loans.
Apart from this, the government had said that it would conduct a full audit of 10 big commercial banks in the context of pressure to implement current capital loan guidelines. Accordingly, the NRB has started the auditing process of commercial banks with large asset size.
On December 22, 2021, the then Finance Minister Janardan Sharma and the then Governor of the Rastra Bank, Maha Prasad Adhikari, had filed a petition with the IMF seeking Extended Credit Facility (ECF).
Under one of the conditions of the assistance of $ 398.8 million for 38 months, the international audit company will conduct on-site inspection of 10 big banks in Nepal. Nepal had said it would complete the on-site inspection of 10 big banks by March 2023. However, the process has been pushed back after the implementation of the Extended Credit Facility (ECF) was delayed last year.
For this, the government has decided to give about Rs 4.5 crore to the Bangladeshi firm. Earlier, the audit selection process initiated by the central bank had failed. After that, the process was started for the second time from Poush 2081 and it is about to materialize.
Earlier, India’s KPMG Assurance and Consulting Services Pvt Ltd was selected to conduct auditing of banks. The NRB had canceled the selection process as the cost of the selected proposer was higher than the cost estimate and available budget.
During the audit, priority will be given to banks that have weak asset quality and do not follow prudent banking practices. According to the terms of the IMF, the audit will be done to study the number of loans given by the banks in which sector and the loan portfolio review.
Bankers are optimistic that the results of the loan portfolio review will be positive. According to them, more than 60 percent of the mortgages in Nepal are based on real estate, so the risk is low.
