July 17: With the repayment of bank loans affected by the Covid-19 induced crisis, fears are rising among bankers that the non-performing loans (NPLs) of banks if the debtors do not repay their loans soon.  The calls made by the Governor of Nepal Rastra Bank (NRB), Maha Prasad Adhikari to debtors, who are able to pay their loans, to clear interest and principal amount, have been ignored by the debtors increasing the risk of surge of NPLs, bankers say.  

The banks had announced to provide concession on the loans during the time of pandemic. NRB had already decided to give 10 percent concession to those who pay their interest within June 16. But, NPLs of banks in FY2020/21 is likely to increase. Bankers say that the double standard of government and the regulatory body to act well with both banks and the debtors is exacerbating the problems in the banking sector.

Company Secretary of Agricultural Development Bank, Himlal Poudel says that it is irrelevant to pressurize debtors who have invested in sectors like tourism and transportation which are badly affected by the pandemic. Even after requesting to those who can pay, the repayment of loans is not satisfactory. He further says that Agricultural Development Bank has collected only Rs 500 million from March to June, out of the targeted amount Rs 1.25 billion. “We have provided additional reliefs to our borrowers besides the concessions announced by NRB. We have provided 10 to 60 percent concession in interest rate to those who have borrowed money from us for more than two years, but the recovery of loans hasn’t been as expected, said Poudel.” According to him, NPL of Agricultural Development Bank in March was 3.29 which will increase significantly due to the non-recovery of loans.  

NIC Asia bank announced an attractive concession scheme to encourage the borrowers to repay their loans. The bank said that if the debtors pay the entire installment/interest amount by Mid-June, they will receive an additional 10 percent discount in the interest amount and a 100 percent waiver of the penalty interest amount. However, the loan recovery has not been as expected, according to a source at NIC Asia Bank.  

President of the Nepal Bankers' Association Bhuvan Kumar Dahal said that it is difficult to put pressure on debtors who are already under stress due to the economic slowdown. Therefore, he says, there is a need to take as much as banks can recover the loans by convincing the borrowers. “The current situation for banks is that very few debtors will repay their loans leading to the increase of NPLs of banks,” he said.

According to Dahal, NRB has said that there is no need to calculate NPL of those who have not paid till mid-July. However, the decision has not been made. Even if the NPL is not shown, the bank's interest income is affected. He said that non-recovery of loans will also impact distribution of cash dividends to bank shareholders.

A banker, under the condition of anonymity, said that the governor had given a verbal assurance that bad loans would not be counted during this period, but as there is no policy as such. The existing rules mandate banks to show their NPLs in the financial statements which will be made public in mid-July. Another banker claims that the governor's assurance that the monetary policy will increase the deadline to those who are unable to pay, restructure, reschedule and other facilities depending on the condition of loans, has led the businessmen not to clear their debts.