According to Nepal Rastra Bank , their non-performing loan (NPL) reached 16.1 percent as of mid-August up from 10 percent in mid-August 2012. The NPL refers to the size of defaulted loans and anything over the size of 5 percent is considered problematic.
Loans worth Rs 10.5 billion out of the total loan size of Rs 65.25 billion disbursed by the finance companies as of mid-August is considered bad.Officials of both the central bank and finance companies have been laying blame on troublesome finance companies and non-recovery of real estate loans for the ballooning NPL.
Samjhana Finance, Nepal Share Market and Finance, Crystal, Kuber, Himalaya, Capital Merchant and Finance, World Merchant Banking and Finance and General Finance have been declared crisis-ridden.
A senior official at the NRB said that all eight finance companies which have been declared crisis-ridden have 50-80 percent NPL, surging the size of the NPL. “There are about a dozen finance companies whose NPL level is below 5 percent but a majority of the finance companies have NPL level of 10-15 percent,” said the NRB official. A total of 57 finance companies are currently in operation in the country.
He lamented that loans disbursed without adequate collateral are difficult to recover. A majority of finance companies that lent massively into the real estate sector in the past when the sector was booming are now struggling to recover their loans.
Lending to the real estate sector was so rampant that even loans categorised under different headings were found to be disbursed in the sector, according to Rajendra Man Shakya, President of Finance Companies Association of Nepal.
“As the recession hit the sector, loan recovery has become a big challenge,” he said. “With many companies with small size of capital lending massively to the sector, the NPL level has only worsened.” In the recent years, finance companies faced the biggest trust deficit from the depositors after problem appeared in one after another company. So, institutional depositors like Army Welfare Fund and Citizen Investment Trust ceased to deposit in finance companies lately.
According to Shakya, the Valley based finance companies which had aggressively lent out to the real estate sector are in deeper trouble than those outside.
The real estate sector has seen a growth in transaction lately, with the Department of Land Reform and Management reporting to have exceeded its revenue collection target by 27.57 percent in the last fiscal year 2012-13.
However, real estate traders maintain that only small amount of land and properties have been sold in the recent days. “As such only small scale loans to the real estate sector are being recovered but not big scale ones,” said the NRB official.
source: the kathmandu post,20 Oct 2013
LINK
Comments
Post a Comment