According to unofficial estimates, leading bankers that have invested around Rs 15 billion to several industries to import Mild Steel (MS) billets, plastic granules, palm oil and clinkers extended under the Trust Receipt (TR) Loan, a short term loan payable within 90 days, now extended the payable period to 180 days as per the central bank directive. A high-ranking government official informed the Republica that a recent quick study conducted jointly by the Ministry of Finance and the central bank reckoned that domestic banking industry might have to face difficulty to recover half of that amount.
Leading domestic steel industries say that they are in deep trouble due to the unpredictable and unprecedented decline in the prices MS billet on the fears of global economic turndown. When we opened letter of credit for importing MS Billets, a major raw material for iron rod steel industries, the global price was US$ 1,100 per ton but the price had fallen to US$ 700 per ton by the time the shipment reached Nepal’s customs, said Pradeep Kumar Shrestha, managing director of Panchakanya Group, a market leader in the domestic iron market.
“Shrinking consumption of steel rods on the expectation of further decline in the prices is the most worrisome development,” he said. As a result, pilling stock of iron rods that has increased up to around 40,000 tons, almost 20 percent of the annual demand, is also causing panic among the iron industries, Shrestha added.
Similarly, another crisis is looming with the crash in Indian stock market. According to government officials, the recent crash in Indian stock market has also endangered around Rs 10 billion that the Nepali businessmen have invested in the Indian stock illegally in the expectation of a huge capital gain. The Bombay stock exchange, popularly known as Sensex scaled up to cross 20,000 points in February only to slide thereafter to around 9,000 points.
The problem is that majority of Nepali businessmen started to invest in the Sensex only after it started to rise up from 15,000 points. “Nepali businessmen enjoyed the remarkable returns until the Sensex reached its peak in February but they started losing the money as the market started to tumble,” said a high-ranking NRB official.
As per the law of the land, Nepali nationals are not allowed to invest in the foreign stock market. According to a leading banker, who prefers to remain unnamed, majority of Nepali investors used the borrowed money from the domestic banking system to invest in the Sensex. It is worrisome that most of the loans have been issued against personal guarantee and multiple banking, a practice of pledging same moveable collateral to different banks, said the official.
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