Banks’ provisioning at Rs 2.29 billion

KATHAMNDU, FEB 21 -

Provisioning of commercial banks went up to Rs 2.29 billion in the second quarter of the current fiscal year from Rs 1.01 billion in the first.

The provisioning usually goes up when the size of bad loans increases. At least 25 percent of the loans should be provisioned, if they are not recovered within three months after the expiration of the payment deadline. If a bank fails recover loans within six months after the ending of the payment deadline, than it should provision 50 percent of the loans. And, if the loans are not recovered within a year of the running out of the payment deadline, 100 percent of the loans should be provisioned.

An increased size of loans also contribute to higher provisioning, as banks are also required to make 1 percent provisioning of good loans, according to the Nepal Rastra Bank (NRB) directive. Banks’ lending has gone up to Rs 502.86 billion from Rs 481.77 billion in the first quarter.

Provisioning was relatively higher during the second quarter of the last fiscal year compared to that in the same period this year, though. “Excessive lending last year could be a reason behind the higher provisioning,” said chief executive officer of a bank. “The growth of lending is slow this year.” As a result of excessive lending compared to deposit growth last year, banks faced liquidity crunch in the second half of the last fiscal year. He, however, said both non-performing loans and provisioning would further go up this year due to difficulty in recovering loans that went to realty sector.

Sunrise Bank witnessed the highest rise in provisioning with the provisioning of Rs 118.01 million in the first six months of the current fiscal year. The bank’s provisioning was at Rs 29.37 billion during the same period last year. NIC, KIST and Nepal Investment Bank have negative provisioning due write back of provision.

In the second quarter, 12 banks witnessed rise in their non-performing loans compared to the first. Machhapuchhre Bank witnessed the highest increment in NPL—from 4.91 percent to 7.17 percent. The bank’s NPL was 1.87 percent in the second quarter last year. A total of 16 commercial banks witnessed rise in their NPL in the first six months this year compared to the same period last year.

Nepal Bangladesh Bank (NBB), Rastriya Banijya Bank (RBB), Agriculture Development Bank Nepal (ADBN) and Machhapuchhrre Bank have the highest NPL among commercial banks.

Bankers say that increasing realty loan defaults will result in further increase in the NPL level of banks. At an interaction organised by Nepal Land and Housing Developers Association recently, both bankers and realty traders had demanded more flexible policy from the central bank to ensure loan recovery. “Banks are facing difficulties in recovering loans from the realty sector,” said Upendra Poudel, chief executive officer of NMB Bank Limited.

http://www.ekantipur.com/2011/02/21/business/banks-provisioning-at-rs-2.29-billion/329910.html
Posted on: 2011-02-21 09:04