Average NPL of banks at 3.4pc in Q1

- POST REPORT, Kathmandu

Nov 22, 2014-

Non-performing loans (NPL) of commercial banks rose by 0.92 percentage points in the first quarter this fiscal year, thanks to high NPL level in two private sector banks—Grand and Prabhu.

According to unaudited quarterly financial reports of 30 banks, Grand has the highest NPL of 25.49 percent, followed by Prabhu with 15.65 percent. In the first quarter, the average NPL level of the banks stood at 3.4 percent, up from 2.48 percent a year ago.

State-run banks, including Rastriya Banijya Bank (RBB), Nepal Bank Limited (NBL) and Agriculture Development Bank Limited (ADBL), used to have higher NPL levels in the past, but they seemed have improved their financial status. RBB  and NBL have less than 5 percent NPL, while ADBL has 5.62 percent. Grand, Prabhu and ADBL are the only banks with more than 5 percent NPL.

With both Grand and Prabhu incurring huge losses as a result of loan defaults, their NPL level stood high. In review period, Grand incurred a loss of Rs 280 million, while Prabhu faced Rs 116.83 million losses.

Grand, however, has improved its financial health as the losses at the end of the last fiscal year stood at a whopping Rs 1.6 billion.

Grand Bank officiating CEO Grand Rajendra Bahadur Shrestha said the recovery of a few real estate loans contributed to the improvement. He said two big loans, including that to Agni Air, which are expected to the purchased by a borrower of another bank, would be recovered within a week. “If we recover those loans, we will be back in the black,” he said.

Grand has to recover around Rs 290 million from Agni Air, promoted by real estate trader Sudhir Basnet whose aircraft are now leased by Simrik Air, and around Rs 220 million of real estate loan.

According to Nepal Rastra Bank officials, Grand faced losses due to massive lending to the real estate sector when Sudhir Khatry was its chief executive.

With Grand’s capital adequacy ratio at 2.55 percent, well below the required 10 percent, the central bank has initiated prompt corrective action against the bank, barring it from collecting additional deposits and lending.

It has also been prohibited from distributing incentives, paying management fees and raising retirement and other benefits to employees. The bank has also been told to obtain the central bank’s approval before introducing any new business activities related to deposits and credit.

On the other hand, Prabhu, formerly Kist Bank, has been facing losses since the beginning of the last fiscal year, thanks to alleged funds embezzlement by former managing director Kamal Gyawali and the bank’s heavy exposure to the real estate sector.

A senior Prabhu official said the bank’s financial situation has improved over last one year, and the recovery has been good.

Banks with the lowest NPL levels include Sanima Bank (0.05 percent) Nepal SBI Bank (0.23 percent) and Standard Chartered Bank Limited (0.25 percent).

Published: 23-11-2014 09:53

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