BFIs have Rs38 billion credit at risk: NRB

BFIs have Rs38 billion credit at risk: NRB

Jun 21, 2015-

Nepal Rastra Bank (NRB) has said around Rs38 billion credit extended by banks and financial institutions (BFIs) is at risk due to the damage caused by the April 25 earthquake to projects and collaterals.

As of the 10th month of the fiscal year, the BFIs have extended loans and advances of Rs1.48 trillion. This means share of the loans at risk stands at 2.55 percent.

The Post Disaster Risk Assessment (PDNA) report has put total property damage and business losses of the financial sector, including both banking and insurance, at Rs 31.9 billion. “During the PDNA report preparation, all BFIs had not reported about t6he damage and business losses. So, the PDNA showed lower level of losses,” said NRB Spokesperson Min Bahadur Shrestha.

Keeping in mind the possible impact on loan recovery, the central bank had asked the BFIs to submit details of the loans that could be affected and the status of the collaterals. The central bank aimed at announcing relief measures for BFIs and borrowers after receiving the details.

Shrestha said it does not mean that all the loans that have been categorised risk-prone are not repayable.

Loans that have been extended against the collateral of destroyed and houses that have sustained cracks have been categorised risk-prone, according to NRB. Also, credit gone to the sectors that have been hit hard, such as hotels, fall under the category. “There is a room for the recovery through insurance coverage,” said Shrestha. “We can extend the repayment deadline through policy review, while some industries such as hotels may need recapitalisation.”

Bankers say they are not sure whether the recovery would be smooth as most of the loans are usually repaid at the end of each quarter.

“Home loans and auto loans are paid on an instalment basis without following the quarter-end trend, and the recovery is relatively slower compared to normal times in home loans,” said Upendra Poudyal, president of Nepal Bankers’ Association (NBA). “We will have to wait for the end of this quarter for other loans.”

Business losses faced by tourism and real estate sectors are particularly expected hit to loan recovery. As per the PDNA, tourism sector sustained losses of Rs 81 billion, while owners’ occupied dwellings and public assets worth Rs303 billion were damaged. Adding business losses due to damages to the dwellings, total losses in the realty sector stands at Rs350.54 billion.

Of the damaged houses, many might have been put up as collateral or some might have been built with loans from BFIs. The report has said the banking sector is expected to see modest deterioration in the loan portfolio quality, impacting the BFIs’ solvency.

As of Mid-May, BFIs’ residential home loans of up to Rs8 million stands at Rs114 billion, and loans to real estate, including bigger projects, stands at Rs84.88 billion.

Published: 22-06-2015 08:25

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