A World Bank recent report unveils that Non-performing loans (NPL) of commercial banks have decreased to a 10-year low The report titled “Nepal Development Update” states that NPL of commercial banks came down to 2.5 per cent in FY 2012-13, the lowest in a decade.
Loans not repaid timely are called NPL in financial sector. A sum of borrowed money upon which the debtor has not made his or her scheduled payments for at least 90 days. A nonperforming loan is either in default or close to being in default. If the debtor starts making payments again on a nonperforming loan, it becomes a re-performing loan.
Six banks reported NPL more than that of 3 per cent, of which only two had NPL in excess of 5 per cent. One of them is state-controlled Agriculture Development Bank Ltd. Eight banks recorded NPL below 1 per cent. Most of the remaining banks had NPL between 1 and 2 per cent. According to the report, two state-owned banks—Nepal Bank Limited and Rastriya Banijya Bank—appear to have achieved a significant turnaround in loan recovery.
The report said the banks’ loan exposure to real estate has decreased to historically low levels of 14.9 per cent from previous fiscal’s 17.1 per cent.
All banks have met the minimum CAR of 10 percent (plus 1 percent buffer capital) except two state-controlled banks—Nepal Bank Limited and Rastriya Banijya Bank.
Their CAR also improved with NBL maintaining a CAR at negative of 0.5 percent from the negative of 5.5 percent a year ago, while RBB showing a positive CAR of 3.3 percent from a negative of 9.3 percent a year ago.
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