Over 2,000 individuals and firms blacklisted last month, banks’ provisioning amount also hit over Rs 126 billion

Published On: December 25, 2022 08:45 AM NPT By: RAJESH KHANAL


Impacts of economic slowdown 

KATHMANDU, Dec 25: Cases of defaulting bank loans have increased by a notable number in recent days after the borrowers failed to pay back their dues on time. This has led to a significant rise in provisioning of banks.

The records with the Credit Information Bureau show it blacklisted 2,181 individuals and firms just in one month between mid-November and mid-December. This includes retail shops, academic institutes, real estate companies and housing developers, consultants and jewelry shops, among others.

With the rise in cases of defaulting loans, the banks’ provisioning amount has also increased significantly, shows the records with Nepal Rastra Bank. In the first four months of the current fiscal year, the provisioning amounts of the banks and financial institutions (BFIs) increased 35.16 percent to Rs 126.27 billion.

Provisioning is the ratio or the cash amounts that the BFIs have to maintain in percentage of the bad assets. Citing the risks that the BFIs could face due to the bad assets, the NRB has made the BFIs concerned mandatory to maintain provisioning amounts based on their nonperforming loans (NPLs).

Based on the overdue period of loans, the central bank has categorized NPLs as sub-standard, doubtful and bad loans. The substandard loans are those loans whose interest and principal payments are due up to six months. The doubtful loans are those in which payments remain due for six months to one year, while the overdue period is more than one year in case of the bad loans.

According to NRB, as of mid-November, the BFIs issued loans of Rs 4.783 trillion, up from Rs 4.233 trillion in the same period last year. The figure is an increase of 4.77 percent compared to the loan amount of the same period last year.

During the review period, the provisioning amount increased from Rs 93.22 billion to Rs 126.27 billion. The provisioning amounts in just one month between mid-October and mid-November surged by an additional Rs 1 billion.

The private sector has been blaming mainly the NRB’s strict policy on loans for the current situation. A number of umbrella organizations of the entrepreneurs have also been staging protests against the central bank’s policy. Economists have also cautioned about the possibility of recession and urged the government to promptly address the current situation.     


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