KATHMANDU: The number of blacklisted names for defaulting on loans has
grown with the increase in the amount of loans floated by the commercial
banks.
The Credit Information Bureau (CIB) has blacklisted 210 firms and individuals for defaulting on loan repayments in the first four months of the current fiscal year. During the corresponding period a year ago, there were 175 such blacklisted firms and individuals.
“The expansion in lending of the banks has been substantial in the past couple of years which has also
increased the number of defaulters,” pointed out vice president of Nepal Bankers’ Association Upendra Poudyal.
According to the recently published first quarter financials of commercial banks, the amount of loans floated by banks has increased by 22 per cent in the past one year. The 30 banks have floated loans worth
Rs 739 billion by mid-October 2013. These banks had lent Rs 606 billion till mid-October 2012.
Nepal Rastra Bank’s data also shows that in the past 10 months, the number of credit accounts at banks has increased by 12 per cent. There were 532,135 loan accounts with commercial banks in mid-November 2012, which has gone up to 595,500 accounts by mid-August 2013.
“In the last three years, the slowdown in the real estate sector has also increased the number of defaults,” added Poudyal. In the past two years, CIB has blacklisted 25 housing developers and construction companies.
In fiscal year 2012-13, CIB blacklisted 660 firms and individuals on the recommendation of financial institutions for failing to repay loans. The content of the blacklist more than doubled in the last fiscal year in
comparison to fiscal year 2011-12, when CIB blacklisted 305 defaulters.
Though the amount of non-performing assets in the banks’ balance sheets seem to be declining, they are provisioning more for possible loan loss. The first quarter financials of the banks show that the non-performing loans (NPL) of 30 banks have reached 2.62 per cent of total loans on average. Such NPL stood at 2.9 per cent a year ago.
Despite the decline in the percentage of bad loans, the amount of provisioning undertaken to cushion against possible loan loss increased in the first quarter. During the period, banks set aside Rs 2.6 billion for the purpose which stood at Rs 2.3 billion a year ago.
“In the past years, banks might have been a bit less cautious in terms of lending which has resulted in the increased number of defaults,” pointed out Poudyal.
In addition, from November 2012, the central bank directed financial institutions to blacklist those who had defaulted on loans worth Rs one million or more from the earlier Rs 2.5 million
ceiling. The downsizing of the eligibility has pushed more individuals and firms to be blacklisted.
There are more individual names in the blacklist than institutions — almost two-thirds are individuals. Banks request CIB to blacklist any person or a firm that fails to repay loans on time. Blacklisting of defaulters most of the time helps banks recover the loans sooner.
Being blacklisted makes the borrower — any natural person or firm — ineligible for acquiring or rescheduling any new loan from any financial institution — not even a credit card.
Moreover, such blacklisted people also become ineligible to hold the post of a director of any publicly listed company or even contest in local or general elections.
source: The Himalayan Times, 18/11/2013
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The Credit Information Bureau (CIB) has blacklisted 210 firms and individuals for defaulting on loan repayments in the first four months of the current fiscal year. During the corresponding period a year ago, there were 175 such blacklisted firms and individuals.
“The expansion in lending of the banks has been substantial in the past couple of years which has also
increased the number of defaulters,” pointed out vice president of Nepal Bankers’ Association Upendra Poudyal.
According to the recently published first quarter financials of commercial banks, the amount of loans floated by banks has increased by 22 per cent in the past one year. The 30 banks have floated loans worth
Rs 739 billion by mid-October 2013. These banks had lent Rs 606 billion till mid-October 2012.
Nepal Rastra Bank’s data also shows that in the past 10 months, the number of credit accounts at banks has increased by 12 per cent. There were 532,135 loan accounts with commercial banks in mid-November 2012, which has gone up to 595,500 accounts by mid-August 2013.
“In the last three years, the slowdown in the real estate sector has also increased the number of defaults,” added Poudyal. In the past two years, CIB has blacklisted 25 housing developers and construction companies.
In fiscal year 2012-13, CIB blacklisted 660 firms and individuals on the recommendation of financial institutions for failing to repay loans. The content of the blacklist more than doubled in the last fiscal year in
comparison to fiscal year 2011-12, when CIB blacklisted 305 defaulters.
Though the amount of non-performing assets in the banks’ balance sheets seem to be declining, they are provisioning more for possible loan loss. The first quarter financials of the banks show that the non-performing loans (NPL) of 30 banks have reached 2.62 per cent of total loans on average. Such NPL stood at 2.9 per cent a year ago.
Despite the decline in the percentage of bad loans, the amount of provisioning undertaken to cushion against possible loan loss increased in the first quarter. During the period, banks set aside Rs 2.6 billion for the purpose which stood at Rs 2.3 billion a year ago.
“In the past years, banks might have been a bit less cautious in terms of lending which has resulted in the increased number of defaults,” pointed out Poudyal.
In addition, from November 2012, the central bank directed financial institutions to blacklist those who had defaulted on loans worth Rs one million or more from the earlier Rs 2.5 million
ceiling. The downsizing of the eligibility has pushed more individuals and firms to be blacklisted.
There are more individual names in the blacklist than institutions — almost two-thirds are individuals. Banks request CIB to blacklist any person or a firm that fails to repay loans on time. Blacklisting of defaulters most of the time helps banks recover the loans sooner.
Being blacklisted makes the borrower — any natural person or firm — ineligible for acquiring or rescheduling any new loan from any financial institution — not even a credit card.
Moreover, such blacklisted people also become ineligible to hold the post of a director of any publicly listed company or even contest in local or general elections.
source: The Himalayan Times, 18/11/2013
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