Kathmandu. As the economy slows down, the most direct impact of this is on the growing banking sector. In recent years, the profitability of banks has been declining, while the burden of non-performing loans and non-banking assets has increased.
Banks in the current fiscal year 2082. The first-quarter data of ’83 shows that the average non-performing loans increased from 4.04 percent to 4.89 percent. That is, about 5 percent of the total loan is unrecoverable.
Experts say that this is not just a ‘number’ but a picture of increasing risk to the bank’s balance sheet. Passive loans reduce profits, but more than that, they say, will have a big impact on the ability to flow credit.
Last fiscal year 2081. The net profit of the banks decreased by 18.47 percent compared to 18.82 percent. The impact of the Genji agitation on September 23 and 24 and the violence that followed was also seen in the banks. After the agitation turned violent, the private sector was attacked, which has demoralized them, which has affected the financial statements of the banks.
The financial report of the first quarter of the current fiscal year has shown that the banks have started to be in trouble and all the concerned sectors should be cautious about it. In the first quarter, the commercial banks earned a net profit of Rs 13.14 billion. The bank had earned a net profit of Rs 16.12 billion in the same period last year.
The potential loan loss of banks has almost doubled compared to the first quarter of last year. As a result, the profits of most banks have declined.
In the first quarter of the current fiscal year, banks have set aside Rs 20.14 billion for potential loan loss. In the same period of the last fiscal year, only Rs 10.44 billion was allocated for potential loan loss.
The non-banking assets of the banks stood at Rs 43.61 billion as of mid-July compared to Rs 43.14 billion in the previous fiscal year. This is an increase of 1.09 percent. The bank could not sell the mortgage and had to book it in its own name. The sale of such properties has become almost impossible in Nepal due to the slowdown in real estate transactions in recent years. As a result, non-banking assets are increasing.
Banks are in trouble when big projects and big borrowers are in trouble. Banks have been forced to display large loans as non-banking assets due to delays or delays in the recovery process.
All commercial banks except Standard Chartered Bank have booked non-banking assets till mid-September of the current fiscal year. Rastriya Banijya Bank has assets worth Rs 319.9 million, Nepal Bank Rs 260 million and Global IME Bank Rs 6.06 billion. Similarly, banks like Everest Bank, Machhapuchchhre, Siddhartha Bank, Nepal SBI have also seen a lot of non-banking assets.
According to experts, the increase in non-banking assets is a warning sign. They say that the banks have misused the flexible policy after the corona epidemic and the consequences of the slowdown of the economy have been suffered.
According to the Land Act, banks have to sell the property within 3 years. However, this has not been possible in practice. As a result, bankers are under pressure.
Banks are forced to carry such assets for years due to lack of buyers, lengthy legal procedures and the risk of falling property values.
That’s why banks are now trying to open a wealth management company. The Nepal Rastra Bank (NRB) is preparing a legal draft of the bill, but the issue has not been finalized for a long time.
If such a company can be formed soon, banks will be able to manage their non-banking assets independently. This is expected to reduce systemic risk.
