29th November 2024, Kathmandu
Bad loans, also known as non-performing loans (NPLs), refer to loans that have remained overdue for more than three months.
Bad Loans Surge in Nepal Banks
In recent months, the banking and financial institutions in Nepal have seen a significant rise in bad loans, raising concerns within the sector. These loans continue to grow, putting pressure on the financial stability of these institutions.
High Bad Loan Rates Across Banks
A recent report highlights that bad loan rates in 13 banking institutions have increased dramatically, with rates ranging from 7% to as high as 34.81%. Development banks and finance companies, in particular, are facing the highest levels of non-performing loans. This trend of rising NPLs is concerning as it affects the liquidity and profitability of the affected banks.
Worst Affected Institutions
The most concerning statistics come from Narayani Development Bank and Janaki Finance, both of which have seen their bad loan rates soar to the highest levels in the industry.
Narayani Development Bank has reported a bad loan ratio of 34.81%, while Janaki Finance follows closely with 34.64%. These institutions are facing significant challenges in managing their bad debts, which could affect their ability to lend to other businesses and individuals.
Other financial institutions suffering from high bad loan rates include:
- Samriddhi Finance: 23.47%
- Saptakoshi Development Bank: 14.77%
- Pokhara Finance: 14.44%
These institutions are also dealing with a high percentage of overdue loans, impacting their financial health.
Other Financial Institutions Struggling with NPLs
Several other financial institutions are also struggling with rising non-performing loans, though at slightly lower rates. These institutions include:
- Guheshwari Merchant Banking & Finance: 13.56%
- Excel Development Bank: 11.73%
- Sindhu Development Bank: 11.29%
- Nepal Finance: 10.36%
- Central Finance: 8.71%
- Reliance Finance: 8.58%
These banks are experiencing a noticeable increase in bad loans, which could affect their ability to offer credit and hamper their financial operations.
Institutions with Relatively Lower NPLs
While most banks are struggling with high rates of bad loans, a few institutions have reported relatively lower non-performing loan ratios. These include:
- Progressive Finance: 7.47%
- Karnali Development Bank: 7.27%
Although these figures are lower compared to the other institutions, the rising trend of bad loans across the sector is still a concern for the overall financial landscape.
Conclusion
The increase in bad loans across Nepal’s banking and financial institutions indicates a growing challenge in the sector. Institutions with high levels of non-performing loans are likely to face liquidity problems, which could affect their lending capacities and overall financial stability.
The government and central bank may need to intervene to address the issue and implement strategies to reduce non-performing loans, ensuring the sector remains strong and resilient in the coming years.
For more: Bad Loans Surge in Nepal Banks
