KATHMANDU: Bankers have described the current slowdown in the banking industry as moderately risky, emphasizing the need for careful management.
During a press conference organized by the Nepal Bankers’ Association, the association’s President, Sunil KC, stated that commercial banks have begun reducing interest rates due to a decline in loan demand. He mentioned that banks have been lowering their lending rates.
At a time when banks have faced criticism for not lowering interest rates despite having excess liquidity, the head of the umbrella organization clarified the banks’ actions in the midst of the ongoing economic crisis.
‘A’ class banks have reported an 18.60 percent decrease in their net profits during the first quarter of the current fiscal year, which is attributed to a significant drop in loan demand caused by the ongoing economic recession.
According to bankers, the loan loss provisions of banks have increased due to a worsening situation with bad debts. KC noted that the provisioning had risen from NPR 7 billion to NPR 16 billion during the review period. He stated, “Banks couldn’t generate more profits due to the increase in loan loss provisions.”
Quarterly reports released by banks reveal that the average bad debt for ‘A’ class banks during the review period was 3.61 percent, compared to 1.66 percent a year ago. Out of the 20 commercial banks operating in the country, six commercial banks have bad debt levels exceeding four percent.
Consequently, their combined profits during the period from mid-July to mid-October this year amounted to NPR 13.47 billion, compared to NPR 16.55 billion in the same period last year.
KC stressed that the situation in Nepali banks is not as alarming as the financial condition of banks in other South Asian countries. Nevertheless, he emphasized the immediate need for cautious measures.
In addition, the NBA has announced a donation of NPR 50 million to support the victims of the Jajarkot earthquake. The association has also expressed its commitment to assist in the reconstruction efforts in the earthquake-affected areas.