Requests for loan rescheduling on the rise: Bankers

Bankers have expressed concerns about a possible rise in defaults as business activities have come to a grinding halt

Oct 17, 2015-Industrialists and businessmen are requesting banks for loan rescheduling, restructuring and interest capitalisation, citing the impact of the ongoing banda in Tarai and India-imposed unofficial trade embargo on their businesses, according to bankers.

Tarai, the country’s main industrial belt, has remained closed for more than two months due to banda organised by Tarai-based political parties, while the imports of commercial goods and raw materials have also stopped due to India’s undeclared blockade.

Thousands of Nepal-bound cargo trucks have been stuck at India’s Kolkata port and bordering Indian areas after the southern neighbour slowed customs clearance.

With importers being forced pay heavy demurrage charges at the Kolkata port, bankers have halted the issuance of letters of credit (LCs) after Nepal’s Consular General Office in Kolkata asked the Nepal Rastra

Bank (NRB) not to issue additional LCs.

Nepal Bankers’ Association (NBA) President Upendra Poudyal said the requests for deferral of payment deadline and loan restructuring were on the rise.

Mega Bank CEO Anil Shah said initially industries came seeking the deferral of loan repayment deadline due to the Tarai banda. “But as imports from third country were also stopped due to India’s embargo, traders are also seeking the capitalisation of interest and loan rescheduling and restructuring,” said Shah, who is also NBA’s vice-president, adding many borrowers were not in position to even pay electricity bills.

However, the bankers, said even capable borrowers were seeking deferral of the loan repayment deadline.

Expressing concerns about a possible rise in defaults due to the closure of industrial and trading activities, NBA has asked the central bank to allow the banks to adjust transactions of the fourth month of the fiscal year

in the balance sheet of the first quarter.

The private sector has said the ongoing Tarai unrest has caused more than Rs100 billion loss to the economy, which they say is double the slump in domestic production as the result of the April 25 earthquake. The ongoing  banda and embargo has hit the main industrial belt of the country, which was largely spared by the earthquake. Moreover, the blockade has resulted in the traders failing to import commercial goods targeting the Dashain festival, the biggest Hindu festival.

Therefore, the Federation of Nepalese Chambers of Commerce and Industry (FNCCI) recently asked the central bank to extend the deadline for first-quarter instalment payment until the second quarter-end, stating the ongoing strikes have badly affected industries and businesses.

The apex private sector body also asked the central bank to make a provision that banks and financial institutions concerned would not impose penal interest for the deferral of the loan repayment deadline.

According to the bankers, the number of defaults and those seeking the deferral of the loan repayment deadline could substantially rise after the first quarter.

“The borrowers repay the loan after the expiry of the first quarter and it is expiring within a few days,” said Ashoke Rana, CEO of Himalayan Bank.

Published: 17-10-2015 08:53

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