Loan Repayment Deadline Extension: NRB measure not helping banks

Real estate traders and other borrowers of banks and financial institutions (BFIs) are not showing urgency to repay outstanding interest after the Nepal Rastra Bank (NRB) allowed BFIs to show the earnings made until mid-August in the last fiscal year’s balance sheet.

Bankers said they received very little repayment from those whose payment deadline expired in mid-july.

According to them, some loanees are asking them to wait for a few more days as the extended period for paying outstanding loans is yet to expire. Kist Bank CEO Kamal Gyawali said his bank recovered interests worth Rs 15-20 million of the loans whose repayment deadline expired at the end of the last fiscal year. “Two big housing companies are asking us to wait for a few more days, while realty traders whose other source of income are limited are also seeking some extra time,” he said, adding that those having minimum outstanding interests are paying.

The scenario in Bank of Asia Nepal (BoA) was not so encouraging until Wednesday in terms of recovering loans due to the central bank’s flexibility.

“As a majority of loanees have already paid loans before the end of the last fiscal year, there has been little income from those who failed to pay by mid-July,” said BoA CEO Parshuram Kunwar Chhetri, adding that there is a tendency among loannees to wait until the end of the expiry date and that there might be more recovery before mid-August.

Given the possibility of loanees defaulting loans massively that could pose huge risk to the banking system, the central bank took some flexible measures including the extension of repayment period so that borrowers could arrange funds for repayment, and banks could also show a good balance sheet which could help restore public’s confidence in banking institutions.

Actually, bankers had requested the central bank for the extension of the repayment period for one more month after loanees related to housing and real estate pressured them.

Nepal Bankers’ Association President Ashoke Rana is not sure whether the central bank’s flexibility helped BFIs to recover loans. “My bank has already closed the book as per the recovery made at the end of the last fiscal year,” said Rana.

Same is the case at DCBL Bank. DCBL CEO Sudhir Khatri said his bank did not wait one more month for payments for closing book as his priority was to increase the paid-up capital within the next few months.

“We opted to go for provisioning which has increased this year compared to last year,” he said.

Source:The Kathmandu Post

1Ropani