Banks will not fall into massive crisis any time soon despite a notable rise in bad debts: NBA

Published On: March 30, 2023 08:36 PM NPT By: Republica  | @RepublicaNepal

KATHMANDU, March 30: Nepal Bankers’ Association (NBA) on Thursday said the bad debts of banks are likely to increase significantly in the future.

According to the association, the non-performing loans of commercial banks have reached 2.49 percent of the total loans. Speaking at a press meet, the NBA’s President Sunil KC said the banks have been facing problems in loan recovery mainly after a decline in land transactions due to the government-imposed restriction on land plotting.

“The decline in land transactions has led to an increase in cases of bad debt,” KC said. “Banks are likely to witness more cases of loans defaulting from the small and medium industries, construction sector and poultry firms, among others.”  

KC, however, said that banks will not face massive losses despite the rise in cases of loan defaulting. “As banks have taken an average margin of 70 percent against the loan collateral, their financial condition will not deteriorate massively,” he added.   

Bankers urged the government for timely payment of the bills of the development projects to minimize the cases of the bad debts of the construction sector. They said the current interest rates are not too high in context of the soaring interest rates globally.

Of late, banks are found to be comfortable in a liquidity position due to a notable rise in their deposit collection. The records with Nepal Rastra Bank show that commercial banks hold deposits of Rs 4.771 trillion.  

KC said they are in position to provide loans of up to Rs 200 billion. “While we have given priority to investing in electric vehicles, we have taken flexible policies also for home loans,” he said.  

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