November 7: The bankers have claimed that the bad loans of the banks which have increased in the first quarter of the current fiscal year are manageable. According to them, the increase in the amount to be set aside for risk management has led to an increase in bad loans.

"At the end of the last fiscal year (FY), the average bad loan of commercial banks was 2.98 percent, but in the current fiscal year, it has reached 3.61 percent," said Sunil KC, president of Nepal Bankers Association, in a press conference held on Monday, adding, “Banks have to be careful.”

He claimed that Nepali banks have less bad loans compared to South Asian countries.

President KC said that the economic activities have declined due to the Covid-19 pandemic and the Russia-Ukraine war, and the banking sector has also been affected.

He said that the effect of restructuring and rescheduling of loans in the aftermath of the Covid-19 pandemic is gradually surfacing now.

Until last year, Nepal Rastra Bank had facilitated loan restructuring and rescheduling. However, it has given the facility to reschedule only the loans that have flowed in the construction sector and the loans that are less than Rs 5 million. Similarly, bankers have said that when there is a decline in economic activities, there is also a problem in loan recovery.

Similarly, the profit of commercial banks has decreased in the first quarter of the current year compared to the previous year after a long time. NBA President KC said that the profit of banks decreased by 28 percent in the first quarter of the current FY compared to the same period of last year. He informed that in the first quarter of the current fiscal year, the profit of one bank was negative, that of 13 banks declined and six increased.

During this period, the amount that banks have to set aside for risk management has increased by Rs 16 billion and this will strengthen the banks, KC claimed.

During the press conference, the Chief Executive Officer of Himalayan Bank, Ashoke Rana, said that bad loans of banks will not increase any further. He suggested that the government should take a special policy to manage bad loans of banks. He demanded to bring provisions to create asset-management companies for long-term solution of bad loans.

Meanwhile, NBA said during the press conference that it has started collecting relief from banks to help the victims of the Jajarkot earthquake.

According to NBA, it has already received a commitment of Rs 50  million as of Monday. Similarly, KC also informed that the association has completed all necessary preparations to hold the Asian Banking Conference in Nepal on Thursday and Friday.