Rising NPLs in major banks worry experts, officials

Kathmandu, September 8:

Bankers, both from the private as well as the government sector and members of parliament, have expressed serious concerns over the spiralling non-performing loans (NPLs) in the banking sector in Nepal, especially in the Nepal Bank Ltd (NBL) and Rastriya Banijya Bank (RBB).

This ever-increasing threat was discussed at a meeting of the Finance Committee of the Parliament (FCP) today.

One of the major concerns is that big borrowers of NBL and RBB are not repaying loans on time. This has pushed the whole banking system towards chaos, feared bankers.

FCP members today raised various questions about the reform process going on in NBL and RBB, and also took stock of the private sector banks.

Dr Dilli Raj Khanal, UML lawmaker and member of FCP, raised queries over the reform process in RBB and asked the management team on why reform is ‘slowing’ and bad loans are not being recovered in time.

Janardan Acharya, spokesperson and chief operating officer of RBB management team, said that the bank management has accomplished various tasks entrusted to it such as developing an international level accounting system, expediting human resource development and adoption of latest computer technologies.

Before the management change in RBB, the bank suffered a loss of over seven billion rupees but it is being gradually reduced and the bank is generating profits, said Acharya. Before the management change, the accounting system was not proper and more than 90 branches’ accounting was in limbo, said Dhrub Bhandary, chief financial controller of RBB management team.

Acharya told the finance committee that due to delay in establishing Asset Management Company (AMC) and delay in settling cases by Debt Recovery Tribunal (DRT), loan recovery has been disturbed.

Although loans have been recovered from small and medium borrowers, there has been nothing positive from the 29 big borrowers despite the government having given them time to reschedule and repay loans, said Acharya.

RBB’s current deposit has reached Rs 46 billion and its profit has been pegged at Rs 1.68 billion.

Suresh Malla, Nepali Congress lawmaker asserted that the bank management should take actions against loan issuers and not only against defaulters.

Talking about reforms, Raju Nepal from NBL management said that in 2005-06, the bank has registered a profit of Rs 1.70 billion. NBL has also distributed bonus to its employees amounting to Rs 210 million as per the Bonus Act, said Nepal. Radesh Pant, president of Nepal Bankers’ Association (NBA), said that NPA is a big problem and even the judicial system is not functioning well in the face of increased problems in country’s financial sector.

Sashin Joshi, CEO of NIC Bank Ltd, opined that banks are maintaining spread rate from four to 4.15 per cent which is very low. While replying to questions raised by the chairman of the finance committee, Smriti Narayan Chaudhary regarding similar interest rates in all commercial banks, Joshi replied, “We don’t want to do cartelling like truck or bus business.

In a free market system, we should compete with each other as our objective is to facilitate consumers.”

Despite a big noise over consumer lending, only about 10 per cent of the total lending is directed towards the consumer segment, he said. Joshi was of the view that there should not be a definition of loan defaulters in terms of wilful and non-wilful defaulters. ‘A defaulter is defaulter,’ he asserted.